Automated Fare Collection Systems

Adoption of an Automated Fare Collection System: City of Tshwane Taxi
Owner's Perspectives
by
PETER MUWANULA
A dissertation submitted in fulfilment for the Degree
of
Magister Commercii
in
Business Management
Faculty of Management
UNIVERSITY OF JOHANNESBURG
Supervisor: Dr. M. Dos Santos
Co-Supervisor: Ms. E. Strydom
2013

DECLARATION
I certify that the minor dissertation submitted by me for the degree Master’s of Commerce (Business
Management) at the University of Johannesburg is my independent work and has not been submitted by
me for a degree at another university.
PETER MUWANULA

Abstract
The smart card concept was first patented in 1970 by Dr. Kunitaka Arimura of Japan
and further developments of the smart card took place throughout the 1970s (History
of Smart Cards) and development still continues today. A Contactless Smart Card
(CSC) is a card the same size of a credit card which consists of a chip, a magstrip
and an antenna imbedded in the card. The purpose of the antenna is to
communicate with a contactless card reader eliminating the need to insert the card
into a Point of Sale (POS) terminal. The main purpose of the contactless feature is to
facilitate transactions below R200 as well as speed up these low value transactions
by eliminating the need to insert a Personal Identification Number (PIN). This allows
card holders to pay for goods or services quickly and it also enables retailers and
service providers to increase their throughput. The CSC can be used in both retail
and transit environments and in South Africa, the CSC is the latest development in
electronic fare media for transit operators and it also forms part of an Automated
Fare Collection System (AFC).
Smart card technology in South Africa for public transport use is still a new concept,
but is now visible with the Gautrain rail service in Gauteng, and the MyCiTi bus
service in the Western Cape. Applying an AFC system to the South African taxi
industry would be a step in the right direction towards formalising the taxi industry
and aligning it with that of more developed countries. This would mean that taxi
owners, drivers and commuters would have to migrate from what is a predominantly
cash based industry to using a CSC for fare media payments. Previous research on
this topic is limited and therefore, this research sought out to determine the views of
selected South African taxi owners regarding adopting an AFC system in the South
African taxi industry. The research objectives of the study were to determine the
levels of awareness and knowledge of an AFC system among selected South
African taxi owners, to determine the perceptions of the benefits, barriers and
industry challenges to adopting an AFC system of selected South African taxi
owners and to determine the views of selected South African taxi owners of the role
of the National Department of Transport (NDoT) in adopting an AFC system.
i

A qualitative research approach was adopted where data was collected by means of
in-depth interviews. The results of the research revealed that despite taxi owners
identifying operational benefits for incorporating the AFC system into their taxis, they
are currently not ready to adopt the solution. Taxi owners indicated that the cost to
use the CSC and the prompt migration from cash to card may be a bit too radical for
the majority of commuters. Most of their commuters are on the lower end of the
market and cash is what they are used to. Taxi owners also showed concern
towards the potential risk of sabotage of the AFC system by their drivers. With the
incorporation of the AFC system in to their taxis, taxi owners could not identify any
real benefit for the taxi driver. One of the identified operational benefits by the taxi
owners was that the AFC system would mitigate the theft of fare income by taxi
drivers. According to the taxi owners, this disadvantage for the taxi driver would drive
them to look for loopholes within the AFC system and exploit the loophole. This
action from the drivers could potentially leave the taxi owners in a worse off financial
position.
This research from a management perspective will give AFC system providers and
contactless card issuers an indication as to how compatible the existing solution is
for the South African taxi industry. As the solution stands now it may not be suitable
for the South African industry and modifications may need to be considered in order
to make the innovation successful.
ii

Acknowledgements
The past three years have been the most challenging and exciting years in my
academic career. My decision to travel down this path has taught me a lot about
myself and has proved to myself that anything is possible through effort and
perseverance.
It gives me great pleasure and gratitude to acknowledge the following individuals that
have contributed to my success:
• To my two dedicated supervisors at the University of Johannesburg who I feel
went the extra mile to provide me with continuous feedback and guidance to
ensure that I complete the research on time. Dr. M. Dos Santos & Ms. E.
Strydom, I would just like to thank you from the bottom of my heart for the
countless hours you put aside to help me with my work. You are really good at
what you do and thank you for your contribution towards producing quality
students and unleashing them to take on the world with confidence.
• I would also like to mention Dr Corne Meintjes who went above and beyond in
assisting me in fine-tuning my research to this level of perfection that even has
me still surprised in what can be achieve when effort and persistence has been
applied.
• To my parents, Edward and Olivia Muwanula who gave me constant support and
my mom who called me almost every day to check up on my status and push me
to complete.
• To my sister Pheona Härtel and brother in law Dirk Härtel who always made their
home available to me when I just needed to work away from Johannesburg.
• To my wonderful girlfriend, Ntebogeng Mashilane, who without fail was always
there for me from the start until the end and always made me smile when I was
down.
• To the participants that participated in this research, thank you for your
contribution towards this research.
iii

TABLE OF CONTENTS
PAGE
Abstract i
Acknowledgements iii
CHAPTER ONE: ORIENTATION AND BACKGROUND
1.1. Introduction 1
1.1.1. The South African Taxi Industry 2
1.1.2. Characteristics of the South African Taxi Industry 3
1.2. Operating Environment and Challenges 4
1.3. New Technology Issues in AFC 5
1.3.1. Operational Advantages of the AFC 6
1.3.2. Infrastructure Costs 7
1.4. Adoption of New Technologies 8
1.4.1. Process and Model of the Innovation Decision Process 9
1.5. Problem Statement 12
1.6. Purpose of Study 13
1.7. Research Objectives 14
1.8. Conceptualisation and Metatheoretical Framework 14
1.8.1. Sociological Systems Theory as Grand Theory 15
1.8.2. Disciplines of Marketing and Business Management 15
1.8.3. Theories Related to the Study 16
1.9. Previous Studies 17
1.10.Research Design 18
1.10.1. Target Population 18
1.10.2. Sampling 18
1.10.3. Data Collection 19
1.10.4. Data Analysis 19
1.11. Delimitations and Assumptions 19
1.12.Importance of the Study 20
1.13.Research Ethics 21
iv

CHAPTER TWO: THEORETICAL FOUNDATION AND PRACTICAL
ORIENTATION OF THE STUDY
PAGE
2.1. Introduction 23
2.2. Systems Theory 23
2.3. Marketing as a Discipline 25
2.4. Business Management as a Discipline 26
2.5. Innovation 26
2.5.1. Types of Innovation 27
2.5.2. Benefits of Innovation from Various Perspectives 27
2.5.3. Barriers to Innovation Adoption 29
2.5.4. Decision Process 32
2.5.5. Characteristics 34
2.6. Background of the South African Payment Environment Related to 36
Transportation
2.7. The South African Taxi Industry 37
2.8. Fare Media 39
2.8.1. Non-Electronic Fare Media Options 42
2.8.2. Electronic Fare Media Options 42
2.9. Conclusion 48
CHAPTER THREE: RESEARCH METHODOLOGY
3.2. Research Design 50
3.3. Problem Statement 51
3.4. Purpose of Study 52
3.5. Research Objectives 52
3.6. Sampling Design 53
3.7. Data Collection 54
3.7.1. Interview Schedule 56
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7.2. Interview Procedure 58
3.8. Data Analysis 59
3.9. Pilot Study 62
3.10.Trustworthiness 63
3.11. Ethical Concerns 65
3.12.Conclusion 65
CHAPTER FOUR: RESULTS
4.2. South African Taxi Owners Interview Results 66
4.3. Biographical Information 67
4.4. Research Results of Research Objective 1 71
4.7. Conclusion 93
CHAPTER FIVE: CONCLUSIONS AND RECOMMENDATIONS
5.1 Introduction 94
5.2 Conclusion of Findings Related to Research Objectives 94
5.2.1. Research Objective 1: Taxi Owners Awareness and Knowledge 94
of an AFC System
5.2.2. Research Objective 2: Taxi Owners Perceptions of the Benefits, 95
Barriers and Challenges to Adopting an AFC System
5.2.3. Research Objective 3: Taxi Owners Views of the Role of the 98
NDoT in Adopting an AFC System
5.3 Recommendations 98
5.4 Limitations of Research 100
5.5 Recommendations for Future Research 100
5.6 Conclusion 101
vi

PAGE
Reference List 103
Appendix A: Interview Consent Form 111
Appendix B: Pictures Used with Interview Agenda 112
Appendix C: Research Agenda 114
Appendix D: National Land Transportation ACT, 2009: Regulations 118
Relating to Integrated Fare Systems.
vii

List of Tables
PAGE
Table 1.1: Costs Associated with AFC System 8
Table 1.2: Theoretical and Metatheoretical Framework 15
Table 1.3: Ethical Considerations 21
Table 1.4: Demarcation of Chapters 22
Table 2.1: Properties of the Systems Theory 23
Table 3.1: Advantages and Disadvantages of In-depth Interviews 55
Table 3.2: Aim of Interview Questions 56
Table 3.3: Code Categories 61
Table 3.4: Aspects of the Pilot Study Addressed 63
Table 4.1: Research Objectives and Associated Themes 67
Table 4.2: Biographical information 67
Table 4.3: The Understanding and Awareness of an AFC System among 72
SA Taxi Owners
Table 4.4: The Perceptions of SA Taxi Owners of the Benefits for them to 74
Adopting an AFC System
Table 4.5: The Perceptions of SA Taxi Owners of the Benefits for 75
Commuters to Adopting an AFC System
Table 4.6: The Perceptions of SA Taxi Owners of the Benefits for 77
Taxi Drivers to Adopting an AFC System
Table 4.7: The Perceptions of SA Taxi Owners of the Barriers for 78
them to Adopting an AFC System
Commuters to Adopting an AFC System
viii

PAGE
Taxi Drivers to adopting an AFC System
Table 4.10: Intended Decisions Regarding the AFC System 85
Table 4.11: The Views of Selected SA Taxi Owners of the Role of the 91
NDoT in adopting an AFC System
ix

List of Figurers
PAGE
Figure 1.1: Composition of a Contactless Smart Card 6
Figure 1.2: Model of the Innovation Decision Process 12
Figure 2.1: Transit Operator Fare Media Options/ Types of Fare Media 39
Figure 3.1: Creswell’s Data Analysis in Qualitative Research 60
Appendix B
Figure 1.1: Commuter Making Payment before Boarding Taxi 112
Figure 1.2: Commuter Presenting CSC to Contactless Reader 112
Figure 1.3: Smart Card Payment Process in Taxi Environment 113
Figure 1.4: Payment Transmission Process 113
x

List of Acronyms
AFC Automated Fare Collection
ATM Automated Teller Machine
BRT Bus Rapid Transit
CSC Contactless Smart Card
GDP Gross Domestic Product
I.T. Information Technology
LBRT Local Road Transportation Board
M.I Management Information
MS Magnetic Strip
MSF Merchant Service Fee
NDoT National Department of Transport
POS Point of Sale
PIN Personal Identification Number
PVC Polyvinyl Chloride
RF Radio Frequency
ROI Return on Investment
SIM Subscriber Identity Module
TTC Toronto Transit Commission
UK United Kingdom
xi

Adoption of an Automated Fare Collection System: City of Tshwane Taxi
Owner's Perspectives
CHAPTER ONE
ORIENTATION AND BACKGROUND
1.1 Introduction
A public transport system is one of the most important building blocks of any
economy (Fourie, 2003:2). In every economy where there is some form of transport
network, people without their own means of transport are reliant on public transport
(Ferreia, 2010:1). In South Africa three main modes of transport exist which includes
trains, buses and taxis (Barrett, 2003:6). Taxis are not only the most accessible but
they are the most common mode of transport within the South African environment
with the basic objective of transporting commuters from one point to another
(Ferreia, 2010:1). The current cash based payment to taxi drivers by commuters
facilitates cash theft and money laundering by taxi drivers (Ndebele, 2011). Thus,
there is a need for an alternative means to collect taxi fares. The National
Department of Transport (NDoT) and the Minister of Transport with his amendments
to the land transport act on the 17th
of June 2011 support the introduction of an
Automated Fare Collection (AFC) system. However, for an AFC system to be
introduced and adopted, taxi owners’ need to be aware and knowledgeable about
the innovation. Consequently, it has become necessary to explore the views of taxi
owners regarding an AFC system to gain an understanding of their levels of
awareness and knowledge as well as how they view the benefits and barriers to
adopting such a system.
This study will provide insight into the readiness of the South African taxi industry in
the adoption of an AFC system. The support provided by the NDoT for AFC systems
in the public transport environment and attempt to create an ecosystem for card
based payments, could be hampered or slowed down as a result of taxi owners and
1

possibly stakeholders within the industry not being ready to adopt the AFC solution.
Understanding the reasons behind the readiness or non-readiness of the taxi
industry in the adoption of an AFC system could be of value to both the NDoT as
well as contactless card issuers.
This chapter provides an overview of the South African taxi industry, outlined a
theoretical orientation towards this research and offers an overview of the
methodology adopted. The following discussion will take a closer look at the South
African taxi industry.
1.1.1 The South African Taxi Industry
The taxi industry was closely tied to the history of apartheid (Barrett, 2003:6). Black
South African's had limited legal access to business opportunities and it was almost
impossible for an African person to obtain a permit to operate (Barrett, 2003:6). The
minority of black African's that managed to get a permit used regular sedan vehicles
and catered for a very small market leaving the rest of the market to be dominated
by the state-owned rail sector and the subsidised bus industry (Barrett, 2003:6).
From the early 1960's black African's were relocated to townships which were part of
the apartheid policy to keep racially defined groups separate from each other
(Barrett, 2003:6). This relocation into townships meant that the commuters that
would usually take the train or bus to work were far away from their stations or bus
stops. Transport costs also escalated and train and bus services only operated
during peak times which were an inconvenience for commuters.
Although there was a loophole identified by taxi operators in the Road Transportation
Act of 1977 which allowed them to apply for a permit, obtaining a permit still proved
to be difficult and taxi operators continued to operate illegally (Barrett, 2003:6).
Between the early 1980's to 1995 the taxi industry grew at a phenomenal rate to
address the issue of limited transport options (Fourie, 2003:2-3).
According to Fourie (2003:2-3) the industry grew from a small informal operation to a
leading transport mode of choice in the public transport industry which accounted for
2

approximately 65% of passenger journeys. According to Fobosi (2013:1), to date, the
South African taxi industry is still an important pillar of the country’s public transport
system. It still remains the most available and an affordable mode of transport for the
public. Fourie (2003:2-3) suggests that the taxi industry provides transport for 5 to 10
million people every day and has a daily turnover of R15 million. This indicates the
magnitude of this industry and thus the need to consider and address areas where
the operational environment of this industry and section of South Africa’s public
transport system may be improved.
1.1.2 Characteristics of the South African Taxi Industry
In a speech held on the 25th October 2011 by Ndebele (2011) the Minister of
Transport for South Africa mentioned a few statistics about the taxi industry:
• the taxi industry is made up of minibuses and metered taxis. Minibus taxis
dominate the market by 90%;
• there are approximately 283 159 public taxis;
• of the available modes of public transport in South Africa, taxis account for 65%
of the mode used by commuters, buses 20% and 15% rail;
• it is estimated that the taxi industry contributes around R30 billion towards the
Gross Domestic Product (GDP) of South Africa;
• the taxi industry is made up of more than 125 000 owners and it creates an
estimated 600 000 jobs, which includes:
o 100 000 Car Washers: Individuals that wash the taxis;
o 80 000 Rank Marshals: Assist commuters by directing them to the
correct taxi;
o 100 000 Conductors: They assist drivers in the collection of fares;
and
o 283 159 Drivers: Drivers of taxi vehicles.
These statistics highlight the size of the taxi industry in South Africa, the importance
of the industry for commuters as well as the number of jobs it provides for individuals
that are willing to work for an income.
3

It was not until the mid-1980's when taxi drivers were no longer taxi owners. Taxi
owners were previously also drivers because of the limited number of vehicles
available. However, owners now employ taxi drivers whose income depends on how
many trips the driver makes (Khosa, 1994:62). Khosa (1994:62) suggests that the
taxi drivers’ conditions of employment are not favourable, taxi drivers are labourers
and not entrepreneurs, are not paid well and will probably never have the opportunity
to save enough to purchase their own taxi.
As taxi operators become more successful in their business, they continue to secure
fleets of taxis to the extent that they become managers employing not only drivers
but also cleaners, mechanics, taxi marshals and accountants (Khosa, 1994:63).
Although taxi drivers have employment, they are forced to work long hours which
can typically be between 16 and 18 hours with set daily financial targets that the
driver must achieve or risk losing their job (Khosa, 1994:63). Taxi drivers are not the
only ones facing challenges. The taxi industry itself also faces challenges such as its
operating environment. However, limited information and research are available
outlining these challenges and thus forms the starting point of this study.
1.2 Operating Environment and Challenges
According to Ndebele (2011) the current taxi industry's operating environment still
has a number of challenges including (1) it is an industry that has been de-regulated
for nearly two decades, but any form of regulation is viewed with suspicion; (2) profit
margins are low coupled with set daily revenue targets which forces taxi drivers to
drive aggressively to make as many trips as possible; (3) it is an industry where
working conditions and training requirements have not been given priority; (4) it is a
cash based industry which creates an opportunity for cash theft and fertile ground for
money laundering activities and (5) loss of revenue to government by way of tax.
According to Walters (2007:1) in developing countries such as South Africa, certain
features are absent from its public transport services as compared to those of first
world countries, such as making use of an Automated Fare Collection (AFC) system.
Not all strategies that have been set by the National Department of Transport
(NDoT) have been or can be achieved. Should the South African taxi industry
4

introduce an AFC system, some of the challenges outlined may be addressed.
Therefore, this research aims to determine the views of selected South African taxi
owners regarding adopting an Automated Fare Collection (AFC) system in the South
African taxi industry in order to gain a better understanding of whether the
introduction of an AFC system may be possible. However, a clear understanding of
AFC technology is necessary and thus discussed next.
1.3 New Technology Issues in AFC
An AFC system is a key interface between a transit operator and its commuters
(Toronto Transit Commission (TTC) Fare Collection Study, 2000:3). The key
objectives of an AFC system is to provide an economical way for transit operators to
collect fares while minimizing losses in the fare collection process and to also
provide commuters with a safe and practical way for paying for their trips to their
various destinations (TTC Fare Collection Study, 2000:3-4).
The Contactless Smart Card (CSC) is the tool that will be used to complete the AFC
system by making it possible for funds to be subtracted from the card by presenting
the card within close proximity to the contactless card terminal. This card looks just
like a normal chip enabled credit card. The card is primarily used for contactless
transactions but it can also perform contact transactions where there is no
contactless card reader present (Cornelius, 2012a).
The only added difference between the CSC and a credit card is that in between the
two plastics that holds the card together is an antenna that allows the card to
communicate with a wireless card receiver. This gives the card the ability to perform
contactless transactions. The basic idea is to eliminate or rather reduce the need to
hold cash by the user of the card and the merchant. The composition of a CSC is
displayed in Figure 1.1
5

Figure 1.1: Composition of a Contactless Smart Card
Source: Calypso Networks Association (2011)
CSC as a means of payment for transportation is starting to slowly surface in South
Africa with the example of the Gautrain rail service between the City of Tshwane and
Johannesburg and the MyCiTi buses in the City of Cape Town. A CSC card is used
to facilitate payment for trips. Contactless transactions do not require for the terminal
to go online and communicate with the bank to approve transactions. Transactions
occur offline and are stored in the terminal. The terminal communicates with the card
to determine if there are funds available on the card and then approves or declines
transactions based on the response received from the smart card (Kruger, 2012).
At the end of the day the transit operator can either place the terminal into a docking
station and the transaction information is sent to the bank, or they can have a
Subscriber Identity Module (SIM) card inserted into the terminal which would send
the transaction information via 3G to the bank (Kruger, 2012). This quick offline
interaction makes transactions occur almost instantly. It makes this form of payment
perfect for transit payments because of the faster throughput and various operational
advantages that can be achieved (Cornelius, 2012a).
1.3.1 Operational Advantages of the AFC
According to the TTC Fare Collection Study (2000:28) the following operational
advantages have been identified with the use of AFC systems coupled with the CSC
card:
6

• reduces the level of fraud because CSC is more difficult to counterfeit than paper
based ticketing systems;
• reduces the amount of both internal and external theft because AFC allows
improved financial control;
• improved fare equipment reliability because minimal or no physical contact or
interaction is required on the AFC devices. This reduces maintenance costs;
• improved management information which can assist in more focused planning;
• faster throughput because no more counting of change.
From these identified operational advantages it is possible to tackle current
challenges in the South African taxi industry such as reducing money laundering
opportunities and better revenue collection for taxi owners. Also the fact that there is
no more money in the system and commuters only have to tap their card, this could
lead to a better customer experience and a safer environment for both commuters
and taxi drivers. As with all new systems that are put in place, there are some costs
that may apply.
1.3.2 Infrastructure Costs
Cornelius (2012b), product owner and manager of Contactless Smart Cards at a
leading Bank suggests that creating an integrated environment for AFC requires
much work and a fully integrated transport network is also expected to take years to
really be visible and appreciated. He is of the opinion that in creating an integrated
AFC environment there has to be a starting point.
The mission of the NDoT in creating a fully integrated system (Delca Systems,
2005:9) has begun in Cape Town with the official launch of the myconnect CSC card
for the MyCiTi Bus Rapid Transit (BRT) Buses on the 10th December 2011 (MyCiTi,
2012). The myconnect card has replaced the paper based ticketing system that was
previously used with the MyCiTi public bus service and this CSC is an open loop
card by card association meaning that it can be used anywhere where the card
association branding can be found .i.e: MasterCard or Visa. The plan is to role this
technology out by starting off with buses, then taxi and rail. By doing this, an
7

integrated public transport network will be created, allowing commuters to use one
CSC for all modes of transport. Like all other new developments there will be some
costs that taxi operators as well as commuters will be subjected to which have been
tabulated in Table 1.1.
Table 1.1: Costs Associated with AFC System
Fees Applicable to Taxi Operators
1. Terminal Rental Fees
a Monthly rental fee per terminal (standalone terminals provided by
Bank)
R250.00 (excl. VAT)
b Call out / support fees R250.00 (excl. VAT)
per hour
c Communication service provider fees – ConnectNet R20.00 excl. VAT per
site
2. Merchant Service Fees
a Merchant Service Fee (MSF) – Taxi operator co-branded LVP
prepaid cards
0.68% excl VAT (no
annual CPI increase
is applicable)
b Merchant Service Fee (MSF) – Debit Cards with LVP functionality (if
introduced)
1.3% excl VAT (no
annual CPI increase
is applicable)
c Merchant Service Fee (MSF) – Credit Cards with LVP functionality (if
introduced)
1.85% excl VAT (no
annual CPI increase
is applicable)
Fees Applicable to Commuters
3. Card Fee
a Card fee R25.80 (excl. VAT)
Value Loads
b Load fee for load of value onto contactless card 2.5% of load value or
minimum of R1.50
(excl. VAT). Whichever
is higher
Source: Cornelius (2012b)
Bosworth (2013) suggests that South African commuters are price sensitive and tend
to favour cheaper costs. The fees listed above could potentially be one of the
barriers for taxi owners adopting AFC and integrating it into their current operations.
1.4 Adoption of New Technologies
Introducing AFC as described by the TCC fare collection study (2000:28) will allow
the users to achieve certain operational advantages which would suggest that taxi
owners would automatically adopt AFC into their taxis to benefit from these
8

operational advantages. According to Rogers (1962:7) technologists think that
innovations that will provide benefit to the users or businesses will be adopted
rapidly but in fact this adoption process occurs at a slow rate. This occurs because
businesses do not have all the information about the innovation. The innovation is
also new, which will develop a degree of uncertainty among businesses (Rogers,
1962:6).
To reduce this degree of uncertainty, complete information about the innovation will
have to be conveyed to the business. This has been identified as one of the main
means of reducing uncertainty (Rogers, 1962:6). For the taxi drivers to acquire as
much information about AFC and finally decide if it would be advantageous, they
would have to go through the innovation decision process.
1.4.1 Process and Model of the Innovation Decision Process
According to Rogers (1962:163) the decision process is a series of steps where the
individual or business first hears of the innovation, they then form their attitudes
towards the innovation, which could be positive or negative. At this stage the
individual/business may decide to adopt or reject innovation. According to Fülöp
(2005:1) making a decision is an indication that there are alternative choices that
need to also be considered. This process not only allows the business to address the
issue of lack of information, it also allows them to evaluate the innovation to see if it
can be incorporated into current on-going operations (Rogers, 1962:163). The last
two steps are the implementation of the innovation and final confirmation of the
decision.
In order for a business to decide on adoption or rejection of the innovation, they will
have to go through five stages (Rogers, 1962:164) being knowledge, persuasion,
decision, implementation and confirmation. These are briefly discussed.
Knowledge
This is when the business is made aware of the innovation and how it functions. In
this initial stage the business learns of the innovation and seeks further information
about the innovation. According to Sahin (2006:16), it is during this phase that the
9

organisation attempts to unpack further detail regarding why the innovation exists,
how it works and how it could potentially benefit the organisation.
Persuasion
The persuasion stage is characterised by the business forming an attitude towards
the innovation. This attitude can be positive or even negative due to barriers and
benefits that the business has identified. According to Wertheimer and Santella
(2004:3) innovation throughout human history has been the driver of progress. It has
enhanced and created new industries and fuelled economies. Innovation has also
provided individuals and businesses with many advantages and new opportunities.
The advantages of AFC as described earlier could play an important role in
persuading taxi owners to take up the AFC system and apply it to their taxi
environment.
From a business perspective, applying innovative solutions to one’s business can
give the business the competitive edge that it needs to remain efficient in its
operations as well as stay ahead of its competitors. In terms of competitive
advantage there could be a number of things that a business does better or more
efficient than its competitors (Hammer, 2006). This could be the utilisation of less
people to do the same work as a similar business. The business with fewer
individuals will be saving operating expenses putting the business in a better
financial position than another.
In the rail transport industry for example, the application of AFC in the Gautrain
system has allowed this transit operator to process commuters much faster than the
Metrorail system giving it the reputation of a fast service from getting onto the train
as well as the train ride. This quick service has therefore been one of the factors that
have attracted business individuals to the Gautrain service. Although there are
various benefits to applying innovative solutions to a business, the barriers in some
cases could outweigh the benefits. In a report compiled by IBM Global Business
Services (2006:1-5) five barriers to the adoption of innovations by businesses were
identified including (1) inadequate funding: Obtaining the funds to peruse the
innovation; (2) risk avoidance: The various risks associated with the innovation that
the business may not be willing to take on; (3) siloing: Businesses tend to have one
10

mission statement, one vision and one strategy. However businesses with
departments or divisions sometimes tend to compete with each other and may
individually fight for the innovation or resist it; (4) time commitments: How much time
that will be required to implement the innovation and its impact on normal operations
and (5) incorrect measures: The correctness in calculating the return on investment
(ROI) of the innovation which if incorrectly assessed could lead to the business
adopting the innovation for the wrong reason. This could lead to the failure of the
innovation in terms of the outcome the business was seeking.
Decision
This is when the business engages in activities that lead to a choice to adopt or
reject the innovation. Part of this process is the defining of the requirements of the
system and determining if these requirements meet the requirements of the business
(Fülöp, 2005:1). Sahin (2006:16) suggests that if an innovation is put through a trial
by the business a decision can be made quicker. The accelerated decision making
occurs because the innovation has been applied to the business own situation and if
it works well the business will come to an adoption decision, if the trial was
unsuccessful the innovation will be rejected until such a time that it can address the
requirements of the business.
Implementation
This is when the business puts the innovation to use. According to Sahin (2006:17),
during implementation there is still a degree of uncertainty about the outcome of full
implementation and therefor the business may still require technical assistance and
support to reduce the degree of uncertainty.
Confirmation
This is when the business seeks some form of reinforcement of the decision made.
An evaluation of the alternatives is usually done to compare the outcomes of various
options (Fülöp, 2005:2). The initial decision can be changed if the business is not
satisfied with the results.
Frambach and Schillewaert (1999:4) describe these stages in a similar manner but
suggest that the adoption decision occurs between two phases. The initiation and
11

implementation phase. According to Frambach and Schillewaert (1999:4) in the
initiation phase the business becomes or is made aware of the innovation, forms a
positive or negative attitude towards the innovation and evaluates the innovation
(product or Idea). In the second phase, the business makes the decision to adopt or
reject the innovation (Frambach & Schillewaert, 1999:4). The innovation decision
process can only be considered a success if the innovation is accepted and
integrated into the business (Frambach & Schillewaert, 1999:5). A model depicting
the Innovation Decision Process is provided in Figure 1.2.
Figure 1.2: Model of the Innovation Decision Process
Source: Rogers (1962:165)
The model that Rogers (1962:165) has defined above will form the basis of the
research to ascertain if taxi owners will adopt AFC systems into their current
practices. This model is important for this study because it is likely that the taxi
owners interviewed in this research will follow the innovation decision process as
described by Rogers in deciding whether they would consider adopting the AFC
technology or rejecting the technology.
1.5 Problem Statement
From a taxi owner's perspective, the current cash based payment to taxi drivers by
commuters facilitates cash theft and money laundering by taxi drivers. Ndebele
(2011) highlighted the points of opportunity for cash theft and money laundering
1. Adoption
2. Rejection
Continued Adoption
Continued Rejection
Later Adoption
Discontinuance
KNOWLEDGE PERSUASION DECISION IMPLEMENTATION CONFIRMATION
12

activities as some of the challenges of the taxi industry. The introduction of an AFC
system may address the issues associated with a cash based payment system. The
NDoT and the Minister of Transport with his amendments to the land transport act on
the 17th
of June 2011 support the introduction of the new AFC system. However, for
an AFC system to be introduced and adopted, taxi owners’ need to be aware and
knowledgeable about the innovation. Consequently, it has become necessary to
explore the views of taxi owners regarding an AFC system to gain an understanding
of their levels of awareness and knowledge as well as how they view the benefits
and barriers to adopting such a system. The problem statement translates into the
general research question being investigated:
What are the views of selected South African taxi owners regarding adopting an
Automated Fare Collection (AFC) system in the South African taxi industry?
A number of research questions arise as a result of the general research question:
• What are selected South African taxi owners’ levels of awareness and
knowledge of an AFC system?
• What are selected South African taxi owners perceptions of the benefits,
barriers and industry challenges to adopting an AFC system?
• How do selected South African taxi owners see the role of the NDoT in
adopting an AFC system?
1.6 Purpose of Study
South Africa has two types of payment methods for its public rail network. Ticket
based payments which Metrorail uses and AFC which the Gautrain rail system uses.
The ticket based system used by Metrorail creates an environment that is not
commuter friendly. Long queues are formed at kiosks to get tickets before boarding
the train. There is possible loss of revenue through theft of money and counterfeit
tickets (TTC Study, 2000:28). The newer Gautrain rail service makes use of an AFC
system with automated card load self-service terminals. This is where commuters
feed cash or swipe their bank cards on a device that looks like an Automated Teller
Machine (ATM) to refund their cards. The commuter then taps their cards to make
13

payments through a series of gates to enter onto the train. The commuter also uses
the same card and taps it on a contactless terminal in a bus to make payment for a
bus ride. The use of this technology by the Gautrain transit operators has resulted in
the operational benefits identified by the TTC Study (2000:28). The introduction of
new technologies can be seen as a progression from what is current, replacing and
closing up loop holes of old systems or processes. According to Snow (2004:2-3)
new technologies replace and force old technologies out of inefficient applications
and are usually efficiency-enhancing. Thus, the introduction and adoption of an AFC
system in the South African taxi industry may address some of the problems and
challenges this industry is facing. However, in order for such a system to be
introduced and adopted by all the relevant parties in the industry, taxi owners need
to be aware of and have knowledge of both the benefits and barriers associated with
such a system. For this reason, this research focuses on exploring the views of
selected South African taxi owners regarding adopting an Automated Fare Collection
(AFC) system in the South African taxi industry.
1.7 Research Objectives
The study is guided by the following specific research objectives as they emanated
from the problem statement and research questions discussed in the previous
sections:
Ro1: To determine the levels of awareness and knowledge of an AFC system
among selected South African taxi owners.
Ro2: To determine the perceptions of the benefits, barriers and industry challenges
to adopting an AFC system of selected South African taxi owners.
Ro3: To determine the views of selected South African taxi owners of the role of the
NDoT in adopting an AFC system.
1.8 Conceptualisation and Metatheoretical Framework
The theoretical and metatheoretical conceptualisation of the study is presented in
Table 1.2.
14

Table 1.2: Theoretical and Metatheoretical Conceptualisation
Grand theory Sociological systems theory
Field/discipline Marketing Business Management
Theories Diffusion of innovation, systems theory, resilience theory
Concepts Innovation
Constructs/dimensions
Benefits Barriers Decision
Process
Characteristics
Higher profits Inadequate
funding
Knowledge Complexity
Reduced costs Risk
avoidance
Persuasion Compatibility
Process
improvements
Siloing Decision stage Relative Advantage
Customer
satisfaction
Time
commitments
Implementation
stages
Trialability
Incorrect
measures
Confirmation
stage
Observability
1.8.1 Sociological Systems Theory as Grand Theory
The systems theory proposes that mechanical, organic and social systems can be
defined by their interactions with their environment (Buckley (1967:129). Systems
theory from a sociological perspective looks for the application of the systems
concept to the widest perspective such as human groups, societies and humanity as
a whole (von Bertalanffy, 1973: 194). Sociology is essentially the study of human
groups or systems from small groups to working groups both informal and formal.
Sociological theory attempts to define the sociocultural systems in terms of
functionalism considering the social phenomena with respect to the whole they serve
(von Bertalanffy, 1973: 195-196). Human groups, such as the South Africa taxi
owners, are not only an outcome of the social forces in the industry and South Africa,
but may be regarded as subhuman organisms where they are part of a “man-created
universe called culture” (von Bertalanffy, 1973:197).
1.8.2 Disciplines of Marketing and Business Management
Marketing is a discipline that enables produces of goods and services to interpret
that a customer wants and to satisfy those wants (Chartered Institute of Marketing,
2009). The Chartered Institute of Marketing (2009) suggests that marketing is a
management process that involves identifying, anticipating and satisfying customer
requirements profitably.
15

According to Hissom (2009:4), management is a process that includes setting
objectives, managing resources, strategic planning and deploying the financial and
human assets required to achieve the set objectives. Business management also
has four key functions which include planning, organising, leading and control.
These make up the functions that need to be performed to ensure a business
functions smoothly (Hissom, 2009:4).
In more developed countries, the transit operator as a customer needed a solution to
remedy some of the challenges they were facing. The concept of AFC systems was
developed to remedy specific challenges experienced in the transit industry and this
technology has been adopted. The adoption of these technologies in more
developed countries than that of South Africa was possibly as a result of the transit
operators applying the key functions of business management in order to achieve
the goal of being more efficient in their operations. The taxi industry in South Africa
is currently experiencing challenges as mentioned by Ndebele (2011) and taxi
owners may also have their individual problems that need to be addressed. If the taxi
owners want to address their business challenges they will have to practice the key
business management functions which should lead to the adoption of the AFC
solution mainly because of the operational advantages that can be gained. The taxi
owners may however need to assess this innovation and decide whether the industry
is ready to adopt the AFC solution.
1.8.3 Theories Related to the Study
Diffusion of innovation
According to Sahin (2006:14), the steps involved in adopting innovations have been
studied for over 30 years. The innovation decision process consists of a series of
steps where the individual first hears of the innovation, forms an attitude towards the
innovation, decides to adopt or reject the innovation and then confirms if they are
satisfied with the decision (Rogers,1962:163). Sahin (2006:14) suggests that Rogers
diffusion of innovations theory is an appropriate method for investigating the
adoption of technology.
16

Resilience theory
The resilience theory points out that there is a strong link between ecological and
social systems which are dependent on change in order to survive (Atwell, Schulte,
Westphal. 2008). Carlson, Bassett, Buehring, Collins, Folga, Haffenden, Petit,
Phillips, Verner and Whitefield (2012:12) define resilience as “a process linking a set
of adaptive capacities to a positive trajectory of functioning and adaptation after a
disturbance”. Adaptation is therefore an important component of remaining resilient.
Although there may be profit in the South African taxi industry for taxi owners the
attractiveness of this industry could be diminishing due the potentially high levels of
revenue loss through theft from taxi drivers. In order to fight the theft taxi owners
need to adapt and apply solutions to protect their money and maintain resilience.
Systems theory
A system, as defined by Skyttner (1996:16), is “a set of interacting units or elements
that form an integrated whole intended to perform some function”. Ackoff (1981:15)
defines a system as a set of two or more elements that satisfy the condition of the
behaviour of each element that has an effect on the behaviour of the whole. The
behaviour of the elements and their effects on the whole are interdependent and
therefore subgroups of the elements are formed. There are a number of properties
associated with the systems theory. These include interrelationship and
interdependence, holism, goal seeking, transformation process, inputs and outputs,
entropy, regulation, hierarchy, differentiation, equifinality and multifinality. These are
discussed in Chapter 2.
1.9 Previous Studies
No other studies of this nature was found. There have however been
implementations of Bus Rapid Transit (BRT) systems and Rail systems that make
use of AFC systems such as (1) My City Bus Service in Cape Town, (2) Rea Vaya
Bus service in Johannesburg and (3) the Gautrain rail service. No research specific
to taxies utilizing AFC systems could be found.
17

1.10 Research Design
According to Babbie and Mouton (2001:270) qualitative research is the study of
human action from the perspective of the social actors themselves. This form of
research also requires specific methods and techniques which form a
methodological approach to obtaining data (Babbie & Mouton, 2001:270). Wimmer
and Dominick (2003:111) suggest that qualitative research makes use of a flexible
questioning approach and although a basic set of questions are included in an
interview schedule, the questions can be changed at any time.
Quantitative research on the other hand is a research method where data is
collected data in the form of numbers, then measures and analyses the numbers to
arrive at a conclusion (Babbie & Mouton, 2001:270). Unlike qualitative research
where the questions are flexible, quantitative research makes use of static or
standardised questions (Wimmer & Dominick, 2003:111). For this research, a
qualitative approach was used to obtain the research data.
1.10.1 Target Population
The target population for this research was all taxi owners operating in the Tshwane
metropolitan area. Babbie and Mouton (2001:173) define a study population as the
element that is being studied. To further clarify the study element the respondent's
demographics were described. The target population consisted of 20 taxi owners
that resided in the City of Tshwane and had two or more taxis. The study focused on
taxi owners with two or more taxis because with the increased amount of taxis to
manage, taxi owners were expected to face more operational challenges than what
they would if they only had one taxi to manage.
1.10.2 Sampling
According to Skosana (2010:47) sampling involves the use of any acceptable
method or procedure using a small number of a total population to make conclusions
regarding the total population. Babbie and Mouton (2001:270) suggest that there are
two types of sampling methods being non-probability sampling and probability
18

sampling. For this research, non-probability sampling was used and the sampling
technique that was used was snowball sampling. According to Babbie and Mouton
(2001:167) snowball sampling is a form of accidental sampling. This form of non-
probability sampling can be initiated by collecting data on the few available
individuals of the target population and then asking those individuals for information
other individuals that fall within the target population needed to be located. Babbie
and Mouton (2001:167) suggest that snowball sampling is the most appropriate
method to use when the target population is difficult to locate.
1.10.3 Data Collection
Data was collected from 20 respondents by setting up scheduled face-to-face in-
depth interviews with the sample population and recorded as many interviews that
were given consent to. According to Burns and Bush (2010:249) in-depth interviews
are a set of questions asked on a one-on-one basis to a participant by an interviewer
to gain more information from the respondent. The interview itself was semi-
structured and an interview schedule was used. Where a participant did not provide
enough information the participant was probed in order to extract more information.
1.10.4 Data Analysis
According to Levine (1997:1) data analysis can be seen as a body of methods that
can assist in the detection of patterns, describing facts and assist with the
development of explanations in the research process. The collected data was first
inductively coded and coded data was placed in categories and then sub-categories.
Axial coding was then done to determine the relationships between the categories
and sub-categories. For this research, Creswell's (2009:185) method for data
analysis was used which consists of six steps for data analysis.
1.11 Delimitations and Assumptions
This research adopted the systems theory as theoretical base. It is acknowledged
that stakeholder theory may provide additional insights into this research. However,
for the purpose of this study, this fell outside its scope. Although this research has its
19

focus on the concept of innovation, its particular focus lies with the decision-making
process, particularly the knowledge phase. Attention was given to the other phases
with less emphasis.
It is assumed the taxi owners participating in this research are currently experiencing
challenges within the industry and are seeking ways to reduce the challenges that
they are experiencing. Due to the publicity created around the Gautrain system,
which was the first high speed rail service that made use of an AFC system in South
Africa, it was assumed that all taxi owners would have heard of this AFC
implementation.
Furthermore it was also assumed that the taxi owners were aware of the NDoT’s
visions for the public transport industry because it was assumed that the NDoT had
great influence over the taxi industry.
1.12 Importance of the Study
Understanding the levels of awareness and knowledge of an AFC system among
selected South African taxi owners as, without being aware or having any knowledge
of the benefits and challenges of such a system could hinder the successful adoption
of this innovation. If taxi owners have a fair grasp of an AFC system and how they
could apply it in the South African taxi industry, the taxi owners, as one of the
stakeholders of the implementation of such a system, could drive this process.
In the case of this research taxi owners have not had an opportunity to test the
innovation in their current operations. This research attempts to understand the
perceived benefits and barriers that the taxi owners think of the innovation. This will
however give an indication to interested parties of the readiness of taxi owners for
the adoption of the innovation. If barriers are identified solutions can be formulated to
remedy the barriers to the adoption of AFC in the taxi industry.
The South African government plays an important role in the public transport sector
with strong campaigns to try to motivate South Africans to make use of public
transport and also to also elevate the public transport sector in South Africa to that of
20

a level that is comparable to first world countries. On the 17th
of June 2011 changes
were made to the National Land Transport Act of 2009 to support and stimulate the
adoption of AFC. Understanding if taxi owners understand what the Minister of
Transport is doing to support AFC is important as this could be one of the factors
that could lead to the adoption of AFC if taxi owners understand and believe in the
work that the NDoT is doing.
1.13 Research Ethics
Ethics is typically associated with morality and deals with matters of right and wrong.
Therefore, anyone involved in research should be aware of the general agreements
shared by researchers about what is accepted practice in this area. The areas that
were explored were voluntary participation, no harm to the participants, anonymity
and confidentiality as well as analysis and reporting (Babbie & Mouton, 2001:470).
Table 1.3 indicates these aspects as they relate to this study.
Table 1.3: Ethical Considerations
ASPECT CONSIDERATION
VOLUNTARY
PARTICIPATION
The wishes of participants were respected that did not want to
participate in the research. Prior to conducting interviews with the
participants, it was ensured that all participants signed a consent form.
NO HARM TO
PARTICIPANTS
It was ensured that no harm in any form was inflicted onto the
participants. It was also ensured that all participants involved in the
research were comfortable to participate.
ANONYMITY
Although contact was made and the participants were interviewed, it was
ensured that special care was taken to ensure that the participants could
not be linked to the responses that were given.
CONFIDENTIALITY
Great care was taken in ensuring that all information that was provided
by the participants remained confidential.
ANALYSIS AND
REPORTING
The findings of the research were reported on without bias. The contact
detail of the researcher was also made available to the respondents
should they which to see the results of the research.
Source: Babbie & Mouton (2001:470-475)
21

Table 1.4: Demarcation of Chapters
CHAPTER NAME DESCRIPTION
CHAPTER 2 Theoretical foundation
and practical orientation
of the study
Innovation can be considered to be one of the key
drivers for business success. From a fare media
perspective, the incremental innovations of fare media
types to address the operational challenges within the
transport industry have led to the AFC system being
developed which addresses most of the challenges of
previous fare media types. There are however various
aspects of innovation that taxi owners have to
consider, which includes the characteristics of early
adopters, the innovation decision making process as
well as the characteristics of the innovation. The
purpose of this chapter was to further elaborate on the
taxi industry in South Africa, fare media types and the
possible barriers and benefits to innovation adoption
that taxi owners could be faced with.
CHAPTER 3 Research Methodology This chapter solely focused on describing the
research methods and design that were used to
obtain data from the taxi owners that were interviewed
in the City of Tshwane. For this research a qualitative
research approach was adopted where non-
probability sampling was used and face-to-face in-
depth interviews were conducted.
CHAPTER 4 Results This chapter focused on analysing, reporting and
finally interpreting the collected data on the opinions
and views that taxi owners had about the AFC and its
application in the taxi environment. What was
discovered was that the majority of taxi owners were
aware of an AFC solution and they were able to
identify their perceived benefits and barriers to
adopting the innovation. The NDoT had no influence
in the taxi owners making their decision to adopt the
innovation and what was considered to be the biggest
barrier in their decision to adopt the AFC system was
the taxi driver.
CHAPTER 5 Conclusion and
Recommendations
This chapter covered the conclusions and
recommendations which were based on the findings
from the data analysis. What was found was the taxi
industry is made up of a number of stakeholders
which includes the taxi owner, the drivers, the
commuters and the government. The AFC solution
would have addressed some of the operational
challenges that the taxi owners were experiencing but
at the same time it would have exposed them to tax
which they were not willing to pay as they feel the
NDoT does not give their industry enough support.
From a systems theory perspective in order for the
AFC system to function correctly all stakeholders in
the taxi industry need to be comfortable with the
solution. As a recommendation to encourage adoption
of the AFC solution a two-step geographically phased
approach were recommended that would slowly
introduce the AFC solution to the various stakeholders
within the taxi industry which could possibly lead to
the acceptance and eventually adoption of the AFC
solution.
22

CHAPTER TWO
THEORETICAL FOUNDATION AND PRACTICAL ORIENTATION OF THE STUDY
2.1 Introduction
Chapter 1 of this study provided a general orientation and overview of the current
research. The theoretical and metatheoretical conceptualisation of the study was
outlined and briefly mentioned. Chapter 2 furnishes more detail regarding the
different aspects of the conceptualisation of the study. Furthermore, it provides a
more detailed look into the South African payment environment, the media used and
the South African taxi industry.
2.2 Systems Theory
According to Langlois (1982:582) the systems theory is focused on the arrangement
and relations between the parts which connect them to a whole. These parts are
interdependent on each other and without each other they cannot make up the
whole. In the context of the South African taxi environment, the taxi industry is a
system made up of key stakeholders who are interdependent on each other and are
not able to function without the other. The taxi industry is made up of taxi owners,
taxi drivers, commuters, the public and the government. The properties of the
systems theory in relation to the study are discussed in Table 2.1.
Table 2.1: Properties of the Systems Theory
PROPERTY OF SYSTEMS
THEORY
DESCRIPTION OF PROPERTY RELATIONASHIP TO THIS
STUDY
INTERRELAIHIP AND
INTERDEPENDENCE OF
OBJECTS AND THEIR
ATTRUTES
Unrelated and independent
elements can never constitute a
system
The taxi industry is made up of
taxi associations and
stakeholders who include
commuters, taxi owners, taxi
drivers and the South African
government. The stakeholders
are the interdependencies that
form the system which is known
as the taxi industry
23

PROPERTY OF SYSTEMS
THEORY
STUDY
HOLISM Holistic properties are
impossible to detect by
analysis, but it should be
possible to define them in the
system
The stakeholders that make up
the taxi industry are separate
entities that not only form the
whole, but they also have an
influence on each other
GOAL SEEKING Systematic interaction must
result in some goal of final state
to be reached or some
equilibrium point being
approached
Each of the stakeholders in the
taxi industry is part of the
system known as the taxi
industry. The goals of the
various stakeholders are
however not the same, but they
influence the parts of the
system
TRANSFORMATION
PROCESS
All systems must transform
inputs into outputs
Each component of the system
impacts on the other. Through
this impact the system as a
whole transform any influences
or inputs into outputs. This
means that if there is an
influence on one part of the
system, the system as a whole
form part of the response or
output to the influence.
INPUTS AND OUTPUTS In a closed system the inputs
are determined once and for all.
In an open system additional
inputs are admitted form its
environment
Through wanting to achieve
different goals the components
of the system provide input to
each other and this affects the
output which impacts on the
various components
ENTROPY This is the amount of disorder
or randomness present in any
system. Non-living systems
tend toward disorder. If they are
left alone they will eventually
lose all motion and degenerate
into an inert mass
The goals of the different
stakeholders in the taxi industry
may not be aligned with each
other and may even be in
conflict with one another, which
may result in turn in entropy
REGULATION The interrelated objects
constituting the system must be
regulated in some fashion so
that its goals can be realised.
Regulation implies that
necessary deviation will be
detected and corrected.
Feedback is important for
effective control
The taxi associations have
specific goals which they want
to achieve and this can only be
achieved through the
application of rules and
regulations to the various
components of the system. In
South Africa the government
governs the taxi industry
24

PROPERTY OF SYSTEMS
THEORY
STUDY
HIERARCHY Systems are generally complex
wholes made up of small
subsystems, which implies
hierarchy
The taxi industry and its
stakeholders which include the
taxi owner, the taxi driver and
then commuter creates a
hierarchy within this system
DIFFERENTIATION In complex systems specialised
units perform specialised
functions
The taxi associations have
specific functions they perform
in the industry.
EQUIFINALITY AND
MULTIFINALITY
Open systems have equally
valid alternative ways of
attaining the same objectives of
from a given initial state obtain
different and mutually exclusive
objectives.
Source: Adapted from Skyttner (1996:20-21)
In the case of the taxi industry from a systems theory perspective, it is important that in the
process of introducing the AFC system, all stakeholders are aware of the potential
introduction of the AFC system. If the introduction does not add value to all the stakeholders
within the system, there may be potential resistance from certain stakeholders and ultimately
total rejection of the innovation. This is so because of the dependencies required for the
system as a whole for function correctly. Marketing as a discipline therefore plays an
important role in the adoption of the AFC solution.
2.3 Marketing as a Discipline
According to the Chartered Institute of Marketing (2009), marketing is a management
process that involves identifying, anticipating and satisfying customer requirements
profitably. Marketing is also a function of promoting goods and services that are
aimed at satisfying the customers’ needs. Similarly Lamb, Hair, McDaniel, Boshoff,
Terblanche, Elliott and Klopper (2012:5) define marketing as a philosophy, attitude,
perspective and a management orientation that focusses on customer satisfaction. In
the context of this study, the adoption of a new innovation in the form of an AFC
system could significantly improve the customer satisfaction levels of commuters.
Lamb et al (2012:10-14) argues that in the field of marketing six competing
philosophies influence an organisation’s marketing activities. The variety of
25

orientations to marketing includes the production, product, sales, consumer, societal
marketing and relationship marketing orientation. This study focusses on the taxi
industry and taxi owners as small-business entrepreneurs with a relationship
marketing orientation towards improving the customer experience of commuters
through addressing challenges in their operational environment.
2.4 Business Management as Discipline
Business management is about achieving set objectives while exercising the four
key functions which include planning, organising, leading and control (Hissom
.2009:4). In its simplest form, business management involves coordinating and
overseeing work activities to ensure that all activities are completed efficiently and
effectively. According to Lefeber and Vietorisz (2004), efficiency involves achieving
the most output for the least amount of input and effectiveness relates to completing
activities so that organisational goals are achieved. In the taxi industry control over
the efficient cash management from fare income has been demised and this loss of
efficient cash management is costing taxi owners. To gain back this control and
mitigate cash loss, innovative solutions can be introduced to the business in order to
address the issue at hand. Through historic information there is evidence that the
introduction of an AFC system into the public transport industry can improve
inefficiencies and improve revenue collection. This may be a practical solution for the
taxi industry in South Africa, but looking at the industry from a systems theory
perspective may impact the decision to adopt as the components of the system do
not function in isolation.
2.5 Innovation
According to Frambach and Schillewaert (1999:2) innovation can be considered as
one of the key drivers for business success. Lazic (2007:12) suggests that
innovation is a process through which creative ideas are brought to life, implemented
and tested. Innovation can not only focus on concept design, implementation also
plays a vital role. If the innovation is not implemented properly it could lead to the
demise of a business (Lazic, 2007:12). The characteristics of the innovation also
have to be suitable for its application (Cornelius, 2012d) and therefore the adaptor of
26

an innovation also with their own characteristics usually considers the products
features and limitations before adoption is considered.
2.5.1 Types of Innovation
According to Dickerson and Gentry (1983:225) there are three types of innovations,
namely continuous, dynamically continuous and discontinuous. Dickerson and
Gentry (1983:225) suggest that continuous innovation causes little or no disruption to
behavioural patterns and it simply involves the introduction of a slightly modified
product. Dynamically continuous innovation causes some disruption to normal
behavioural patterns. This form of innovation may involve the introduction of a new
product or even the modification of an existing product (Dickerson & Gentry,
1983:226). Discontinuous innovation involves the introduction of a totally new
product and it will require the users of the new innovation to change their behavioural
patterns totally (Dickerson & Gentry, 1983:226).
The introduction of CSC into the South African taxi environment will totally change
the way taxi owners collect fares and how commuters pay for their trips and would
thus constitute discontinuous innovation. Commuters will have to top up their card on
a regular basis depending on how much money they store on the card and the taxi
owner has to come to terms with receiving digital money. Taxi owners may also have
to pay their drivers a fixed monthly salary for services rendered to the taxi owner,
which is quite different from the norm in terms of how taxi drivers are currently paid.
The possible impact that it may have on taxi drivers is reducing the opportunity for
them to pocket some of the revenue. They may not be in favour of the adoption of
the AFC system because of this reason.
2.5.2 Benefits of Innovation from Various Perspectives
Innovation, if applied correctly can drive a business to achieve higher profits through
additional sales and reduced costs which are derived from process improvements
(Samson, 2010:4). Innovation applied in the business can also be used to increase
customer benefits through more value added services (Samson, 2010:13) and thus
customer satisfaction. The application of the AFC system could provide benefits to
27

the taxi owners, drivers and commuters. As suggested earlier some of these benefits
could be operational benefits for the taxi owner, cash security and convenience for
the commuter and cash collection benefits for the taxi driver. In South Africa, the taxi
industry consists of individual taxi owners who collectively make up a taxi
association. In order for the AFC system to be adopted widely amongst taxi owners
in the early stages of the adoption process, a critical mass of taxi owners may need
to display some of the characteristics of early adaptors as suggested by Dickerson
and Gentry (1983:226).
Characteristics of Early Adopters
According to Dickerson and Gentry (1983:226) early adaptors of innovations have:
• more education;
• more income; and
• higher status occupations.
Dickerson and Gentry (1983:226) suggest that better education could relate to the
better comprehension of the functions and performance of the innovation. Higher
income relates to the level of financial risk associated with the purchase of the
innovation. This financial risk is smaller with higher income since the cost of the
innovation is a smaller portion of the individual’s disposable income. Higher status
occupation means that the individual could have more regular exposure to new
innovations and products than individuals with lower status jobs. Taxi owners in the
South African environment can not been seen as early adaptors because they
possibly do not meet two of the three criteria as identified by Dickerson and Gentry
(1983:226). Education levels are generally low among taxi owners and their
occupations are not considered as higher status occupations (Drabile, 2012). These
could be some of the characteristics taxi owners have that could have a negative
influence in the adoption of the innovation.
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2.5.3 Barriers to Innovation Adoption
In a report compiled by IBM Global Business Services (2006) five barriers to
innovation adoption were identified from a business perspective. These are
discussed in the following sections.
Inadequate funding
Inadequate funding refers to the situation where there is not enough money to fund
the initiative (IBM Global Business Services, 2006:2). The taxi owner has to allocate
some of his/her working capital towards the AFC system and may find him/herself in
a situation where he/she may not have enough money to fund the AFC system for
the period required for commuters to get used it. The potential risk for the taxi owner
is that if he/she depletes the funds that were allocated to funding the migration
before the operational benefits are realised, the owner may have to scrap the whole
system and revert back to cash in order to survive. This will result in the owner
incurring a financial loss.
Risk Avoidance
With every innovation there are risks associated with it due to potentially negative
consequences (Solomon, 1999:280). The risks may be unique to the taxi owners and
not yet identified even when background research about the innovation was done.
The IBM Global Business Services (2006:2) report indicates that businesses want to
maintain their health, wealth and peace of mind. These are businesses that are
classified as businesses in their comfort zone and according to IBM Global Business
Services (2006:2) no progress can be made by business without calculated risk
taking. In order for the taxi industry to move to the next level of fare media
acceptance and efficiency enhancement, they have to consider migrating from cash
to card and convince all of its stakeholders of the benefits that will also apply to
them.
Siloing
Within large businesses there are departments and there could be a disconnect
between these departments. In the context of the taxi industry, these departments
could be looked at as the taxi owner, the driver and the commuter. If any of these
29

role players resist the offering it will bring about a barrier preventing the
implementation of AFC. According to IBM Global Business Services (2006:3) a
better understanding of the needs and concerns of the business can be a starting
point in managing the conflict. Taxi owners may have to gain an understanding of the
concerns and fears of their drivers as well as their commuters. Understanding these
concerns will reduce the risk of resistance from the drivers and commuters. It will
also enable them to have a better understanding of their fears in using this new
product as opposed to physical cash which is what they are used to.
Time commitments
According to the IBM Global Business Services (2006:4) time is a very precious and
scarce commodity which can’t be wasted. The application and integration of AFC
into the taxi owner’s current operations will enhance productivity in terms of cash
collection and possibly faster throughput. On the other hand the time the taxi is taken
off the road to undergo terminal installation may prove to be too expensive for the
taxi owner because that is lost income for the day which each taxi is not operating.
Incorrect measures
Many businesses use revenue and profits as a measure of success (IBM Global
Business Services, 2006:5). In the case of an innovation that is truly specific to an
industries business, information may not be available to truly convince the innovation
adaptor that the innovation will achieve their expectations. In the South African
environment there is no data specific to the taxi industry. There is only data available
to the bus, and rail services. This lack of information may further add to the risk
element in the eyes of the taxi owner and negatively influence their decision to adopt
the innovation. Despite all the identified barriers there are also benefits that a
business can achieve if the innovation has been applied properly (Samson, 2010:4).
Barriers to Innovation from a Commuter Perspective
From a commuter perspective Ram and Sheth (1989:6-7) have identified five
potential barriers to innovation which are applicable to the taxi commuters and AFC.
These barriers include usage, value, risk, tradition and the image barrier.
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Ram and Sheth (1989:7) suggest that the usage barrier relates to the innovation not
being compatible with existing practices or habits. To further add to the resistance,
taxi commuters may see the innovation as an offering that does not offer strong
value for money as outlined in Table 1.
The risk barrier represents the level of uncertainty that the commuter has towards
the AFC (Ram & Sheth, 1989:8). Laukkaanen, Sinkkinen and Laukkanen
(2008:3062) suggest that uncertainty is inevitable with all innovations which support
statements made by Rogers (1962:174). The innovation to the man in the street in
this instance may be too advanced for local commuters. This could lead to
commuters fearing the product as they do not physically see their money which is
what they are used to. Public transport commuters in South Africa are generally poor
and although some may have bank cards they still may want to use cash as a means
of payment.
The tradition barrier refers to the deviation from cultural tradition which may be
created by the innovation (Ram & Sheth, 1989:8-9). The physical handling of money
in South Africa may have some cultural significance that we are not aware of.
The image barrier refers to resistance created because of the origin of the innovation
(Ram & Sheth, 1989:9). This origin can be in terms of country or even in terms of
business. Although there is no real evidence that suggests that South African
commuters dislike products such as plastic cards which were produced in America
(Rankl & Effing, 1997:2) this could be one of the unknown barriers to this innovation.
Barriers to Innovation from a Taxi Owner Perspective
Barriers to innovation from a taxi owner perspective could be directly linked to the
characteristics of early adopters suggested by Dickerson and Gentry (1983:226).
Taxi owners in South Africa usually don't have high education levels, their
occupations are not regarded as high status occupations and the amount of money
taxi owners make is questionable, some make a lot of money and other owners
make just enough money to be able to survive (Drabile, 2012). The perceived
characteristics of the taxi owners could be barriers to the innovation.
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2.5.4 Decision Process
As consumers come across problems they need to explore various options and
make decisions in order to solve their problems (Hawkins & Mothersbaugh, 2010:
496). Rogers (1962:164) has identified five steps in the innovation decision making
process which an individual or business has to go through before an innovation is
adopted.
Knowledge
According to Rogers (1962:164) individuals and businesses play a passive role in
the exposure to an innovation. He suggests that individuals or businesses can not
actively seek information about an innovation until the individual or business knows
that the innovation exists (Rogers, 1962:164). Individuals therefore expose
themselves to new information about products or services if it falls within their area of
interest or need (Rogers, 1962:166).
Taking into consideration the statements made by Rogers (1962:170) the current
challenges faced in the South African taxi industry as highlighted by Ndebele (2011)
should have led the taxi owners to seek information about possible new innovations
that could help them address some, if not all of the current challenges that they are
facing in their industry. If the innovation is not in the country, the technology could be
imported from a country where it is available.
The introduction of the Gautrain could have possibly led taxi owners to try and
understand the type of technology and fare media type that this transit operator
uses. The bus and rail service are forms of transport and this should fall under an
area of interest for taxi owners. This could suggest that taxi owners have in some
way or other heard of this technology and have been exposed to additional
information about it.
Persuasion
The term persuasion in this context as described by Rogers (1962:169) refers to an
attitude formation from the perspective of the individual or business adopting the
innovation. In terms of a product or offering, an attitude can be described as the way
32

one thinks, feels and acts towards the product in question (Hawkins &
Mothersbaugh, 2010:392).
During the persuasion stage the individual becomes more psychologically involved
with the innovation (Rogers, 1962:170). What aids in this process is that the
individual actively seeks more information about the innovation and even goes as far
as imagining the use of the innovation in the current working environment as well as
in a future situation. Solomon (1999:274) suggests that consumers may actively
search the marketplace for information after a need has been recognised.
According to Hansen (2011:2) the consumer decision making process is one that is
very complicated and could possibly involve a number of constructs. Many
innovations have a degree of fear and uncertainty associated with them. Therefore
part of the individual’s information seeking process includes consultation and
innovation evaluation information from past users in order to reduce the innovation’s
perceived risk (Rogers, 1962:170).
Decision Stage
A method to assist the adopter in the decision process and reduce the level of
uncertainty is to partake in a pilot run. A pilot is a form of partial adoption of the
innovation and making use of it in a real world environment. This practice is done to
reduce uncertainty relating to the innovation and potentially increase the chances of
the adopter adopting the innovation (Rogers, 1962:172).
A pilot programme is currently underway in the City of Cape Town and
Pietermaritzburg to assess the AFC system in the taxi industry. The pilot programme
is currently run under controlled conditions but detailed feedback obtained from the
pilot according to Rogers (1962:172) should assist in making the decision to adopt
the AFC system.
Implementation Stage
This phase occurs when the adopter puts the innovation into use. Rogers (1962:174)
suggests that in this phase there is still a degree of uncertainty even though the
adopter decided to go ahead with the innovation. This is a clear indication that
33

although the adopter obtained information about the innovation, the adopter is still
uncertain about how the innovation may uniquely affect their business.
Most businesses consist of stakeholders which could be the ones that resist the
innovation. In the taxi industry, the heart of the industry is the commuter and taxi
driver. Without the commuter and taxi driver buy in, there would be no revenue for
taxi owners. Therefore if the commuter resists the use of AFC the taxi owners will not
achieve their anticipated outcomes of the innovation because of poor uptake
Cornelius (2012b).
As was mentioned earlier, what could contribute to the fear and resistance of
innovation adoption could come from a customer or business perspective or a
combination of both which could affect the decision to implement the innovation. Taxi
owners and taxi drivers could reject the system (business perspective) or taxi
commuters (customer perspective).
Confirmation Stage
This is the final stage of the innovation decision making process. By taxi owners
implementing an innovation, it is not an automatic indication that the innovation has
been totally accepted. Taxi owners may still decide to revert back to their previous
operating model. Rogers (1962:184) suggests that the individual or business will
seek reinforcement for the innovation decision that was made.
In the case of the City of Cape Town, a monthly Management Information (M.I.)
report from their banking partner allowed them to monitor the use and uptake of the
myconnect smart card. If uptake became suddenly poor and usage drops, the city
could possibly revert back to the old system. Rogers (1962:184) also suggests that if
the innovation turns out to not achieve the operational advantages expected, this
could lead to the rejection of the innovation.
2.5.5 Characteristics
From a taxi driver’s perspective, the innovation of AFC may allow the taxi owners to
realise the operational benefits as identified by the TTC Fare Collection Study
34

(2000:28) or the advantages of using smart cards as described by Plotnikov
(2001:57). What can potentially influence the adoption of the innovation is the
compatibility and complexity of the innovation (Dutton, kahin, O’Callaghan & Wyc
Koff, 2005: 1). According to Sahin (2006:17), the characteristics of innovatioion
includes: (1) complexity, (2), compatibility, (3) relative advantage, (4) trialability and
(5) observability. Each of these is discussed in the next section.
Complexity
Complexity relates to the how difficult the innovation is for the potential adopter to
grasp. The higher the level of complexity, the lower the rate of adoption (Sahin,
2006:18). During the knowledge gathering stage of the innovation decision making
process taxi owners’ have the opportunity to assess the level of complexity of the
innovation and this will aid them in deciding if the innovation is too complex for them
or their stakeholders to adopt.
Compatibility
Compatibility relates to how the potential adopter perceives the new innovation to fit
into their current lifestyle and needs. Sahin (2006:18) suggests that if an innovation
is compatible with the potential adopters needs uncertainty about the innovation is
decreased and the likelihood of innovation adoption will increase. The South African
taxi industry is a cash based industry and migrating to a card based system is a
concept that is new for the majority of the commuters, drivers and owners. The AFC
system and the use of the CSC card may be incompatible for the South African taxi
industry.
Relative Advantage
Sahin (2006:18) suggests that relative advantage is the perception that the
innovation provides more satisfaction to the potential adopter than a solution that
already exists. The operational advantages highlighted by the TCC study (2000:28)
could be experienced by the taxi owners. However, the potential operational
advantages that could be achieved by the taxi owners may not out-weigh the
potential complexity and compatibility issues of the AFC innovation.
35

Triability
Trialability relates to the relative ease of experimenting or testing the innovation
before a decision is made by the potential adopter (Sahin, 2006:18). Taxi owners
may only be willing to adopt the innovation if they are able to pilot the innovation.
Taxi owners may adopt the innovation but the stakeholders also need to adopt the
innovation in order for the AFC system to function properly.
Observability
Sahin (2006:18) describes this as the degree to which the results of the innovation
are visible. For the taxi owners this information is available from the banking partner
that the City of Cape Town collaborated with. The results of the innovation AFC
system that was applied to the buses may not necessarily be related to taxies but
this could give the taxi owners an example of what they can expect if it was applied
to their industry.
2.6 Background of the South African Payment Environment Related to
Transportation
In the South African economy there is reliance on money in the form of coins,
banknotes, cheques, credit/debit cards and also electronic transactions. Dr Monde
Mnyande, who was the Chief Economist and General Manager of the South African
Reserve Bank, mentioned at a Bank Note Design Competition Gala which was
hosted in the City of Tshwane, that "In addition to the traditional coins and banknotes
and other paper-based instruments, direct debit and credit transfers, debit and credit
cards, and telephone banking as well as internet banking facilities have become
more widely available. Electronic systems have rapidly increased in importance, both
for retail and wholesale transactions to the point where they now account for the
majority of payments in the formal sector, by numbers as well as by value"
(Mnyande, 2007:2).
Despite this, there is still a large portion of the economy that makes use of cash as a
method of payment for goods and services and the handling of money comes at a
cost. These costs include but are not limited to distribution costs and the storing of
36

notes (Bergman, Guibourg & Segendorf, 2008:42). Risks associated with the
physical handling of money include leakage costs, which is the removal of some of
the total sum of money that is to be delivered, making use of cash-in-transit services,
robberies and cash heists. Leakage is high in the taxi industry (loss of revenue due
to theft usually by taxi drivers). It not only affects the owners of the transport vehicles
or buses but it also affects the amount of revenue received by the government in the
form of taxes on this income if it has been declared.
2.7 The South African Taxi Industry
As was mentioned in Chapter 1, the taxi industry was closely tied to apartheid and
black South African's found it almost impossible to obtain a permit to operate in the
taxi industry (Barrett, 2003:6). The Motor Carrier Transportation Act of 1930
stipulated that the transportation of goods or services was not allowed without
permission from the Local Road Transportation Board (LRTB) (Sekhonyane &
Dugard, 2004:13).
Due to the fact that taxi owners found it difficult to obtain permits to operate vehicles,
corruption between taxi owners and law enforcement officials became common with
the issuance of fraudulent permits (Barrett, 2003:8). With limited available
transportation options for commuters the taxi industry grew at a phenomenal rate
(Fourie, 2003:2-3). According to Sekhonyane and Dugard (2004:14) black
commuters found this form of transportation popular because taxis (1) provided late
night transportation; (2) travelled to places where other forms of transportation did
not travel; (3) charged affordable rates; and (4) had shorter queues than that of the
queues for buses.
According to Sekhonyane and Dugard (2004:13) prior to deregulation in 1985, taxi
operators had defy laws to provide a transportation service to commuters.
Fortunately for taxi operators deregulation was to take place in the coming years.
Deregulation
Once deregulation of the taxi industry took place in 1985, permit enforcement halted
and the industry was then flooded with operators. During this time of massive and
37

accelerated growth within the industry, signs of over-saturation in some areas
around the country set off violent battles between taxi owners who were fighting for
routes all over the country (Barrett, 2003:7). The results of these “Taxi Wars” were
the death of between 1500 and 3000 people between 1994 and 2000 (Barrett,
2003:8). Despite the negative impact of the "Taxi Wars", the taxi industry had
created an environment of employment among South African's.
Employment in the Taxi Industry
Ndebele (2011), indicates that the taxi industry is made up of more than 125 000
owners and it creates an estimated 600 000 jobs, directly contributing to
unemployment reduction in the country. Drivers within the taxi industry make up the
majority of workers in the industry (Ndebele, 2011; Barrett, 2003:9). According to
Barrett (2003:9), there are more wage employed drivers than self-employed drivers
in the industry. Wage employed drivers are drivers that are employed by taxi owners
and are paid in four different ways (Ferreira, 2010:29):
• Drivers’ are not paid a basic wage, but rather pay a percentage of the week’s
takings to the owners and keep the rest as their own income.
• Drivers’ receive a basic wage and then pay the owner a percentage of the
week’s takings and then keep the rest as their additional income.
• Drivers’ pay in all the money that they receive to the owner and then the owner
pays the driver a regular wage (this is uncommon).
• Drivers’ give the owner all the money that they receive in the week and the
owner allows the driver to keep all the income on an agreed day of the week.
Dealing with so much cash and no recording of cash collected leads to a loss of
money as there are many loop-holes in this method of collecting cash. Barrett
(2003:9) suggests that taxi owners claim that up to 50% of their takings are stolen by
drivers. This may indicate that the current fare media type used in the taxi industry is
not favoured by taxi owners and they may be willing to take on the innovative CSC
as a new fare media type. From the available fare media, the innovative AFC system
has been in operation in America and European countries for a number of years
now. This system was introduced into these economies to increase both the
efficiency and attractiveness of public transportation services (Thomas, 2005:803).
38

According to Dodgson and Gann (2010:14) most innovations are incremental from
what is current. This is also the case with fare media, whereby a new fare media
type is developed to address the shortfalls of fare media that is being used.
2.8 Fare Media
Fare Media can be described as the accepted payment instrument by transit
operators as proof of payment for the use of their services (Plotnikov, 2001:47).
Before electronic fare media was introduced other forms of media were available and
still exist today in many economies as depicted and described below by Plotnikov
(2001:47). Fare media options or types of Fare Media are outlined in Figure 2.1.
Figure 2.1: Transit Operator Fare Media Options / Types of Fare Media
Source: Plotnikov, 2001:58
2.8.1 Non-Electronic Fare Media Options
A number of non-electronic fare media options exists and are outlined below.
39

• Cash
Coins have been the most widely accepted medium for payment of transit services.
Once the cost of transport increased transit operators began to accept notes in
addition to the already accepted coins. Cash in many economies is the major
payment method that individuals use because it is readily available (Plotnikov,
2001:48). In South Africa the use of coins is still a common sight and is still the most
popular medium within the taxi industry (Ndebele, 2011). For transit operators this
meant that all of their potential clients had access to cash and there were no
modifications required for the transit operator’s equipment in order to accept cash.
Barriers
In the United States of America, barriers of using cash for transport payments started
to emerge particularly when the fare structure started to change to cater for many
variables that were used to calculate the price of the fare (Plotnikov, 2001:48). These
barriers could have also been the reasons why some transit operators in South
Africa such as Metro Rail made the migration to paper based tickets.
These variables include:
• distance travelled;
• time of day;
• rider type ( adult, student, disabled or senior).
The introduction of alternative media for transit operators was also due to fraud, theft
and the growing administrative work required in recording such transactions for audit
purposes.
• Tokens
These were one of the most popular forms of fare media and were available in a
variety of forms and materials (Plotnikov, 2001:49). Tokens can be in plastic or metal
and can vary in size or shape. One of the major benefits that was achieved with
tokens was the ability to accommodate the various pricing structures for pensioners
and volume discounts which encouraged and increased the use of public
transportation services (Plotnikov, 2001:49).
40

Barriers
The use of tokens meant that transit operators had to perform additional revenue
collection activities such as production of tokens, distribution, valuation, collection
and the recirculation of tokens. To the commuter tokens meant that they could only
use the token with a specific transit operator which was not the case with cash
(Plotnikov, 2001:50).
• Paper Tickets
Paper tickets as a fare media is very similar to the token. The major difference is the
material used. The fact that the material used to make paper tickets is paper; made
them easier and cheaper to produce than the token. Tickets could also easily be
removed from circulation and invalidated than the token (Plotnikov, 2001:50). Transit
operators also favoured this form of fare media because it could also accommodate
distance based fares by having the travel times and stops that the commuter was
entitled to, which further added to the fare structure that was available to commuters.
The bus and train industry in South Africa to this day still makes use of a paper
based ticketing system. However these two transit operator types are slowly making
a shift towards contactless smart card payment options.
Barriers
Although there are added benefits to that of the tokens, paper based tickets are
more prone to counterfeiting (Plotnikov, 2001:50).
• Paper Passes
Paper passes which are also known as flash passes almost have the same concept
as a paper based ticket. The commuter is only subjected to a visual inspection of
their ticket (Plotnikov, 2001:50). The difference here is that a paper pass gives the
holder of the pass a window period in which to use the transit operator’s services.
This could be a week or even a month where the pass becomes invalid after its
"valid to" date has lapsed (Plotnikov, 2001:50). The paper passes are usually issued
out at a discount price and in some instances even rider type discounts are applied
making it attractive to commuters. This form of fare media is still used today in bus
services that operate around mines in South Africa. Miners purchase passes which
41

are usually weekly based and as they enter the bus the miners show their passes
and the bus driver does a quick visual inspection of the pass. The Golden Arrow Bus
Service in Cape Town also makes use of a paper pass type system but their passes
are made out of plastic (Golden Arrow Bus Service, 2012).
Barriers
For the transit operator, use of paper passes can lead to high levels of fraud. For the
commuter, paper passes usually require a high prepayment for the pass and if they
were to lose their ticket the pass can't be recovered (Plotnikov, 2001:51).
As transit operators developed new fare structures to accommodate and meet
commuter demands, the complexity of the various forms did not only make it difficult
to effectively administer, it also drove up operational costs. The next phase of
innovation was electronic fare media which had the ability to easily support complex
fare media structures while keeping administrative costs down. Although this was the
first step in the development of the CSC, the older forms of fare media such as cash,
paper tickets and passes still remain and will still take some time to be phased out.
2.8.2 Electronic Fare Media Options
At the same time, a number of electronic fare media options exist which are outlined
below.
• History of Plastic Cards
According to Rankl and Effing (1997:2) the introduction of the plastic card started in
the United States of America (USA) in the early 1950s. The material that was used to
manufacture plastic cards was polyvinyl chloride (PVC). This allowed for the
production of durable and long lasting cards which were better suited for daily use as
opposed to the paper equivalent (Rankl & Effing, 1997:2).
The first trans-regional plastic card used for payment of goods and services instead
of cash was issued out by Diners Club in 1950 (Rankl & Effing, 1997:2). With the
entry of the two major card associations, namely Visa and MasterCard, the
42

proliferation of the plastic card occurred at a rapid pace. This occurred first in the
USA, then Europe and then the rest of the world (Rankl & Effing, 1997:2).
• Magnetic Strip Tickets and Passes for Transit
This form of fare media was first introduced in the 1960s in the United Kingdom (UK)
and the United States (Plotnikov, 2001:51). The innovation and concept of electronic
fare media came from the banking industry. This form of payment acceptance was
very expensive for most transit operators and was only adopted by large transit
operators such as the Bay area Rapid Transit (BART) in San Francisco and the
London Underground rail service in the UK (Plotnikov, 2001:51).
The magnetic strip (MS) media has two main elements: The carrier and the layer of
magnetic material. The carrier can be made out of paper or plastic and the magnetic
material comes in two types of material: low-coercivity or high-coercivity. Low-
coercivity MS media can be easily damaged by magnetic interference such as
bringing the MS ticket in close proximity to a speaker or even cell phone (Plotnikov,
2001:52). High- coercivity MS media are more resistant to most magnetic fields and
will not be affected from most types of magnetic fields. The use of electronic fare
media also reduces administrative costs because these are electronically tracked
and stored (Cornelius, 2012c). The next level of progression from the MS was the
smart card which opened new doors and opportunities to transit operators.
• Integrated Circuit Smart Cards
Smart cards are the latest development in electronic fare media for transit operators.
The smart card concept was first patented in 1970 by Dr. Kunitaka Arimura of Japan
and further developments took place throughout the 1970s (History of Smart Cards).
This smart card technology is gaining greater acceptance within the public transport
industry in South Africa as seen with the Gautrain rail service in Gauteng and the
MyCiTi bus service in the Western Cape. These cards can also be used for retail
applications and not only transit which further adds to the convenience factor
(Cornelius, 2012c). In its physical form the smart card looks similar to a normal credit
or debit card. Countries in Europe and Asia-Pacific offer smart cards as their primary
43

accepted fare media or as a secondary option to their traditional options (cash, paper
tickets, paper passes) which further adds to consumer convenience.
The smart card has three interfaces available which include:
• contact;
• contactless; and
• dual-interface.
Contact Interface
In order for the card to function, the smart card must be inserted into the Point of
Sale (POS) or card reading device. For a transaction to occur the chip must be
properly aligned with contacts within the card reading device and transactions can
take up to seven seconds to conclude (Cornelius, 2012c). This is not suitable for
transit applications because transaction time in this industry is an important factor.
Contactless interface
With a contactless interface, the smart card does not require any physical contact
with a contactless card reader. There is an antenna in between two plastics that
holds the card together. This antenna communicates with the contactless card
reader by using radio frequency (RF). Power to transmit this RF is drawn from the
contactless terminal and transactions are concluded in less than 0.1 seconds making
this form of payment suitable for transit applications (Cornelius, 2012c). This
technology is currently in use in the MyCiTi Cape Town buses and the Gautrain,
which is a high speed train service that operates between City of Tshwane and
Johannesburg.
Dual-interface
These smart cards have both contact and contactless features. According to
Cornelius (2012c) in the South African environment this type of interface would be
the most suitable because users of the card would still be able to use the card at
retailers who don’t have contactless card readers installed.
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Benefits
In addition to the operational benefits that were highlighted by the TCC fare
collection study (2000:28), Plonikov (2001:57) suggests that smart cards are far
more superior to traditional fare media (non-electronic forms) in terms of durability
and life cycle. These cards can also be automatically replenished when linked to a
credit card account (Plonikov, 2001:57). This feature according to Cornelius (2012c)
is dependent on country or region and the rules set up by government which banks
have to comply with. CSC technology has many benefits to both to the commuter
and to the transit operator. However there are certain barriers that may exist on
implementing this technology which could have some negative influence on the
adoption of this technology by South African taxi owners.
Perceived barriers to the adoption of CSC
In South Africa there are incremental shifts taking place from cash to electronic
payments for public transport. The government is positioning South Africa to accept
such payment methods within its transport network and transform the way South
Africans pay for transportation. On the 27th May 2011 the Minister of Transport,
S'busiso J Ndebele, under section 8(1) (b) of the National Land Transport Act 2009
(Act No.5 of 2009) signed the amendments made to the schedule relating to AFC.
This schedule was published and made available on the 17th
of June 2011. The
requirements for AFC system implementation in public transport are as follows:
• AFC should be made possible through bank issued contactless smart cards.
• AFC must be interoperable through all participating banks.
• Clearing and settlement of payment transactions must take place through the
National Payment System Act, 1998 (ACT NO. 78 of 1998).
• Passengers with a suitable bank account must be able to use bank issued fare
media obtained as a result of their relationship with any participating bank.
• Passengers without a suitable bank account must be able to use bank issued
fare media from a participating bank or a third party card issuer operating in
conjunction with the participating bank.
• The payment system must adhere to the banking and payment regulatory
framework.
45

• The data structure (NDoT) must be loaded onto all bank issued fare media
(National Land Transport Act, 2009) which will allow for distance based fare
within the republic.
Having this act in place is a strong indication of the willingness and support of the
South African government to allow for the implementation of AFC. This innovation
could potentially address a lot of the issues that taxi operators are currently facing.
Key Features of the CSC
The key features of the CSC include (Cornelius, 2012d):
• The CSC allows for both contact and contactless transactions. The card has an
antenna inside the card which communicates with a contactless card reader. All
the cardholder has to do is tap the card to pay for goods or services. Where there
is no card reader present, the card can be swiped or inserted to pay for goods
and services. All contact transactions will require a PIN code to be entered.
• The card can be used anywhere in South Africa for the purchase of goods or
services at any retailer or service provider displaying the card association
relevant to the card (MasterCard® with PayPass™, MasterCard® Cash or Visa
PayWave).
• All contactless purchase transactions done with the card are offline transactions
and do not require PIN entry or signature. Money sits on the chip and any
purchases done with the card is approved against the available balance on the
card.
• The cardholder can obtain a mini statement, view their available balance and
load funds from the issuing bank’s ATM’s, participating bank branches,
participating merchants or service providers displaying the MasterCard® with
PayPass™, MasterCard® Cash or Visa PayWave logos.
• Cards will be valid for a period of at least 36 months from date of issue. The card
will expire as per the date printed on the front of the card. Once the card expires,
the card holder will need to obtain a new card and the balance of the funds are
transferred onto the new card.
46

• A card load fee will be charged for all card loads but no transaction fees will be
charged for the purchase of goods and services. (2.5% of load amount, but may
differ from various other financial institutions).
• If a card is lost or stolen, the incident can be reported to the financial institution
that issued the card. A replacement card will then be issued to the cardholder (at
a fee) and funds from the lost/stolen card transferred to the new card. This will be
done 30 days after the hold was put on the lost/stolen card. The remaining
balance on the card could be less than it was on the day you reported the card
lost/stolen. This would happen if any offline transactions took place. This is so
because this products objective is to replace physical money, so just like in
instances where you lose your wallet and there is money inside the wallet the
money is usually stolen, the same applies to the card. If there are no transactions
that occurred on the card in a 30 day period the card holder will receive the
balance on the card when it was reported stolen.
Card Load Channels
The CSC can be funded through various load channels and this includes (Cornelius,
2012d):
• ATMs - These are Automatic Teller Machines that accept bank cards or cash and
have the ability to prefund CSCs. These devices in most cases operate 24 hours
a day and are usually located in convenient locations i.e. Petrol stations, mini
markets and outside bank branches.
• Bank Branches - These are normal bank branches where the commuter can visit
and have their CSCs prefunded. Branches usually operate for about 8 hours per
day.
• Internet Banking - This is an electronic channel where if the commuter has
access to the internet at home or at work they can transfer funds from their
existing bank account onto the smart card.
• Merchant Loads - Merchants are retailers that have opted to provide the service
of funding CSCs. Making use of this channel is more costly to the card holder as
the merchant usually charges a small "convenience" commission on top of the
2.5% load fee that is charged to prefund the CSC.
47

Limitations of the CSC
The limitations of the CSC include (Cornelius, 2012d):
• No cash withdrawals are possible with this product (eg: No cash back
transactions, ATM withdrawals or over the counter withdrawals at financial
institution branches).
• A maximum value of R3000 may be loaded onto the card per calendar month but
not in a single load transaction. The maximum amount that can be loaded onto
the card at a time is R1500 and this is also the maximum balance that can be
maintained on the card at any given time. Any purchase transaction with the card
is limited to R200 per transaction.
• Only Rand(R) currency can be loaded and the card can only be used locally
(South Africa).
• No interest is earned on the funds available on the card.
2.9 Conclusion
Innovation can be considered to be one of the key drivers for business success.
Although this may be the case they are various aspects of innovation that have to be
considered, which includes the characteristics of early adopters, the innovation
decision making process as well as the characteristics of the innovation. What could
be discovered in this research is that one of the aspects of innovation could
supersede the other even if there are potential benefits to be realised with the
adoption of the innovation. The systems theory provides a basis for understanding
the taxi industry and the decision-making of taxi owners as the AFC system is
dependent on the CSC while the taxi industry is dependent and impacted by its
stakeholders.
The payment environment in South Africa has progressed from cash to card. From a
fare media perspective, the incremental innovations of fare media types to address
the operational challenges within the transport industry have led to the AFC system
being developed which addresses most of the challenges of previous fare media
types. Although this fare medium is now available, other forms of fare media
mentioned previously are still used and in particular cash.
48

In the South African environment cash still plays a vital role in the economy and
because of its popularity in the taxi industry, taxi owners may find it difficult to make
the migration to AFC systems despite the identified operational advantages that can
be achieved. Furthermore, if there is acceptance from taxi owners after going
through the innovation decision making process, resistance could still come from a
customer and taxi driver perspective. The customer perspective refers to the
commuters who are one of the more important stakeholders in the industry.
The next chapter of the research describes the mythology that was used to gather
the information required to assess the views of selected South African taxi owners
regarding the adoption of an AFC system.
49

CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Introduction
This chapter outlines the research design that was followed to achieve the purpose
of the research namely to determine the views of selected South African taxi owners
regarding adopting an Automated Fare Collection (AFC) system in the South African
taxi industry. The introduction of AFC into the South African taxi environment is a
new and additional approach to fare collection within this industry. This form of fare
collection has not been commercially introduced into the taxi industry and therefore
there is very little information on the perceived barriers and benefits to adopting this
technology into a largely cash dominated environment (Ndebele, 2011). Therefore a
qualitative paradigm was used to gain a deeper understanding of the views of South
African taxi owners.
The chapter further outlines the research objectives that guide the investigation, the
sampling design, the interview guide, data collection methods, data analysis
procedures, the pilot study and the rigour and ethics associated with the study.
3.2 Research Design
In the selection of which research approach to use, both quantitative and qualitative
research approaches were considered. Terre Blanche, Durrheim and Painter
(2006:47) suggest that quantitative researchers collect raw data in the form of
numbers and analyse this raw data using statistical types of data analysis. Some
methods used for quantitative research identified by Silverman (2000:3) include:
• Social surveys: This includes random samples and measured variables; and
• Official statistics: The analysis of previously collected data.
For qualitative research Terre Blanche et al. (2006:47) suggests that qualitative
researchers collect data from speaking to people and then analyse this data by
coding and placing the coded information into categories. Babbie and Mouton
(2001:270) further add to this definition by defining qualitative research as the study
50

of human action from the perspective of the social actors themselves. In summary,
Silverman (2000:8) suggests that qualitative research provides a deeper
understanding of social phenomena than what quantitative research does.
Due to the fact that AFC is still fairly new in the South African transport industry, a
deeper understanding of the adoption of AFC within the taxi industry in South Africa
were sought. Therefore a qualitative research approach was used in this study.
3.3 Problem Statement
From a taxi owner's perspective, the current cash based payment to taxi drivers by
commuters facilitates cash theft and money laundering by taxi drivers and owners
which is time consuming. The introduction of an AFC systems may address the
issues associated with a cash based payment system. The NDoT and the Minister of
Transport with his amendments to the land transport act on the 17th
of June 2011,
support the introduction of the new AFC system. However, for an AFC system to be
adopting such a system. The problem statement translates into the general research
question being investigated:
A number of research questions arise as a result of the general research question:
• What are selected South African taxi owners’ levels of awareness and
knowledge of an AFC system?
• What are selected South African taxi owners perceptions of the benefits,
barriers and industry challenges to adopting an AFC system?
• How do selected South African taxi owners see the role of the NDoT in
adopting an AFC system?
51

3.4 Purpose of Study
South Africa has two types of payment methods for its public rail network. Ticket
based payments which Metrorail uses and AFC which the Gautrain rail system uses.
The ticket based system used by Metrorail creates an environment that is not
commuter friendly. Long queues are formed at kiosks to get tickets before boarding
the train. There is possible loss of revenue through theft of money and counterfeit
tickets (TTC Study, 2000:28). The newer Gautrain rail service makes use of an AFC
system with automated card load self-service terminals. This is where commuters
feed cash or swipe their bank cards on a device that looks like an Automated Teller
Machine (ATM) to refund their cards. The commuter then taps their cards to make
payments through a series of gates to enter onto the train. The commuter also uses
the same card and taps it on a contactless terminal in a bus to make payment for a
bus ride. The use of this technology by the Gautrain transit operators has resulted in
the operational benefits identified by the TTC Study (2000:28). The introduction of
new technologies can be seen as a progression from what is current, replacing and
closing up loop holes of old systems or processes. According to Snow (2004:2-3)
new technologies replace and force old technologies out of inefficient applications
and are usually efficiency-enhancing. Thus, the introduction and adoption of an AFC
system in the South African taxi industry may address some of the problems and
challenges this industry is facing. However, in order for such a system to be
introduced and adopted by all the relevant parties in the industry, taxi owners need
to be aware of and have knowledge of both the benefits and barriers associated with
such a system. For this reason, this research focuses on exploring the views of
selected South African taxi owners regarding adopting an Automated Fare Collection
(AFC) system in the South African taxi industry.
3.5 Research Objectives
The study is guided by the following specific research objectives as they emanated
from the problem statement and research questions:
among selected South African taxi owners.
52

to adopting an AFC system of selected South African taxi owners.
NDoT in adopting an AFC system.
3.6 Sampling Design
According to Silverman (2001:248) the purpose of sampling is to study a
representative subsection of a defined population to come to a conclusion about the
whole population. This involves certain decisions such as selecting the correct
people, behaviours, settings and/or social processes to observe (Terre Blanche et
al., 2006:49).
For this research, the City of Tshwane was selected, because this region had an
estimated population size of 2,345,908 in 2008 (City of Tshwane Municipality
Household Survey, 2008:7). Around 21% of the total population makes use of taxis
daily to commute to work which is the highest among all available public transport
options in this city (Cameron & Krynauw, 2001:20).
According to Wimmer and Dominick (2003:84) a population is a group or class of
subjects and a sample is a subset of the population that is representative of the total
population. For this research, the participants were only taxi owners that resided and
operated in the City of Tshwane region. The target populations for this research were
20 taxi owners from one of three townships namely Soshanguve, Attridgeville and
Mamelodi. The target population had to adhere to the following criteria because it
would contain the research to the City of Tshwane and taxi owners with more than
one taxi are expected to experience more business challenges:
• Taxi owners could include both male and female; and
• taxi owners only operated in the City of Tshwane area and did not venture out of
this region.
Taxi drivers were approached at taxi ranks in the City of Tshwane. The taxi ranks
visited were based in Menlyn, Mamelodi, Attridgeville and Shoshanguve. Snowball
53

sampling was used to recruit more participants in this study. According to Babbie
and Mouton (2001:167) snowball sampling is a form of accidental sampling. This
form of non-probability sampling is initiated by collecting data on the few available
individuals of the target population and then asking those individuals for information
other individuals that fall within the target population needed to be located. A total of
20 taxi owners were located through this approach. This number of taxi owners were
necessary because if the minimum target population criteria was met and each taxi
carried on average 16 commuters this would equate to 640 commuters transported
daily by 40 drivers. The potential business challenges that the taxi owners would
experience were sufficient for this research.
All participants were encouraged to specify any time and location that they were
most comfortable with. Taxi owners were given this option because of the sensitive
nature of the taxi industry and rivalry between taxi associations for routes. After
giving the participants this option, the interviews were primarily conducted at an
office in the association that the participants' were members of, or at the participants’
place of residence.
3.7 Data Collection
According to Creswell (2009:178) data collection involves setting up parameters for
the study which involves collecting information and setting protocol for recording
information. Creswell (2009:178) further suggests that data collection methods
include:
• observations;
• in-depth interviews;
• documents; and
• audio-visual materials.
For this research, in-depth interviews were used, because in-depth interviews are
more focused on the reasons behind the answer the participant gives (Wimmer &
Dominick, 2003:127). Smaller samples are usually used as opposed to surveys and
participants are expected to provide as much detail as possible in their responses
54

(Wimmer & Dominick, 2003:127). Where participants provide answers with not
enough detail, the participant were probed to elaborate and provide more information
(Babbie & Mouton, 2001:289). According to De Beer, Barker, Botha, Claassen, de
Klerk, de Villiers, Diederichs, Froneman, Hooyberg, Louw, Maree, Mbennah,
Mersham, Roodt, Scholtz, Skinner, Steyn, Teer-Tomaselli, van Vuuren and Verwey
(1998:406) as well as Wimmer and Dominick (2003:127) in-depth interviews have
both advantages and disadvantages. These are presented in Table 3.1
Table: 3.1: Advantages and Disadvantages of In-depth Interviews
Advantages Disadvantages
Participants are more motivated to participate
and respond through a one on one session (De
Beer et. al., 1998:406).
The interview process is usually long and both
parties could become tired (De Beer et. al.,
1998:406).
More accurate responses on sensitive issues are
provided (Wimmer & Dominick, 2003:127).
Interviews usually not standardised and different
versions of the same questions could be asked
were different answer could be (Wimmer &
Dominick, 2003:127).
Higher success rates are achieved with one to
one interviews (De Beer et. al., 1998:406).
It is an expensive data collection process (De
Beer et. al., 1998:406).
It allows for probing to be more effective and to
understand underlying issues and motivations to
the comments made during the interview
(Wimmer & Dominick, 2003:127).
Some questions may be difficult to ask and
difficult for the participant to answer and may
even embarrass both parties (De Beer et. al.,
1998:406).
All individuals irrespective of education or literacy
level can easily participate (De Beer et. al.,
1998:406).
It allows more control over the interview process
since he is administering it (De Beer et. al.,
1998:406).
This method was chosen because a deeper understanding of the personal issues
and experiences surrounding the adoption of AFC were needed. According to
Saldaňa (2011:32) interview formats can consist of highly structured, unstructured
and even prearranged, but spontaneous formats. In this study semi-structured
interviews were used to ensure that the major topics of interest were covered. This
approach was used in order to make the interview seem like more of a conversation
than an actual interview with the objective of making the participant feel as relaxed
55

as possible. In addition participants were probed in order to uncover unanticipated
experiences and perceptions.
3.7.1 Interview Schedule
According to Prescott (2011:17) an interview schedule is a data collection tool similar
to that of a questionnaire. This tool is used where an interview participant is met and
a set of questions is asked that are the same for each participant. An interview
schedule was used in order to collect raw data from the participants that would
answer the objectives and ultimately the aim of this research. This section outlines
the questions that in the interview schedule and the purpose of the questions being
asked.
Aim of Interview Schedule Questions
According to Saldaňa (2011:35) the available time during interviews is usually
limited. The questions asked were open ended, person centred and that explored the
participants’ experiences and viewpoints. In addition, the questions asked during the
interview were designed to achieve the primary and secondary objectives of the
study (See research agenda in Appendix C). Some of the questions asked were also
based on the theory explored in the literature review.
Table 3.2: Aim of Interview Schedule Questions
QUESTION ASKED AIM RELATION TO
RESEARCH OBJECTIVE
1. What is it like being involved
in the taxi industry?
To understand the risks involved in
the taxi business and to assess if
owners like their type of business.
To identify if there were
any benefits or challenges
in the taxi industry.
2. What got you involved in this
industry and how long have
you been operating as a taxi
owner.
To determine if taxi owners found
this industry lucrative and joined
the industry or they are in the
industry for additional income and
any other reasons.
Additional information
3. What are the challenges in
the industry that you currently
face?
To determine the challenges that
the taxi owners are experiencing in
their daily operations of the
business.
To understand the
challenges that the taxi
owners were experiencing.
4. What steps are you taking to
solve the challenges?
To determine if taxi owners
actively seeks information,
methods or best practices to
address current challenges faced
in their daily operations.
To determine if taxi
owners were aware of
AFC systems as one of
the solutions that could be
used and applied to their
business.
56

QUESTION ASKED AIM RELATION TO
RESEARCH OBJECTIVE
5. As an individual involved in
the transport industry do you
frequently look out for new
ways to operate in your
business so that it performs
better?
To establish if taxi owners actively
seek information not just locally,
but also internationally that could
be applied to their business. - This
question also gives the taxi owner
another chance to elaborate on
question 4.
AFC systems as one of
the solutions that could be
used and applied to their
business.
6. Do you like receiving cash as
a means of payment or would
you like to receive your
payment in another form? i.e:
coupons, tickets etc and why.
To determine if taxi owners have
explored other fare media options
and the reasons surrounding their
responses.
other forms of fare media
including contactless
cards and AFC systems.
7. The cash that you receive do
you bank it and why?
To determine if taxi owners form
part of the banked community or
are deliberately avoiding banking
their money for tax related
reasons.
Additional information
8. From what I have told you
earlier on about Automated
fare collection systems, what
is your opinion?
To determine the level of
understanding of the AFC system
and if taxi owners can see this sort
of system working for them.
To determine the
awareness and knowledge
of an AFC system.
9. What do you think the
benefits might be to having
this sort of technology in your
taxi? That is using cards to
accept payment as opposed
to cash.
To give the taxi owner an
opportunity to list the benefits that
they have been able to pick up
with the AFC system. The benefits
should be applicable to
commuters, taxi owners and
drivers.
To determine the
perceptions of the benefits
to adopting the AFC
system.
10. What is your opinion on what
the NDoT is trying to achieve
with regards to AFC?
To establish if taxi owners track
the progress made by the NDoT in
trying to achieve their visions for
the transport industry in South
Africa.
To determine the views of
the taxi owners of the role
the NDoT plays in the
adoption of AFC
11. Do you think that the support
the NDoT is giving to the
transport industry in terms of
creating an environment to
accommodate AFC is a
reason for you to make use of
this technology?
To establish if taxi owners
appreciate the work put in by the
NDoT and their reasons
surrounding their responses.
To determine the views of
the taxi owners of the role
the NDoT plays in the
adoption of AFC
12. What do you think might stop
you from having this sort of
technology in your taxi?. That
is using cards to accept
payment for commuter trips
as opposed to cash.
opportunity to list the barriers that
they have been able to pick up
with the AFC system. The barriers
should be applicable to
commuters, taxi owners and
drivers.
To identify the barriers to
the adoption of the AFC
system.
13. Having discussed all of this,
would you like to have this
system in your taxi?
To determine if taxi owners would
consider such a system in their
vehicles and why.
To determine if the
benefits and features of
the AFC were favourable
enough for the taxi owner
to adopt the system.
14. Do you have anything more
that you would like to say
about this system?
opportunity to provide some
recommendations from their
perspective on how the AFC
system could be improved or if it is
acceptable the way it is.
To identify the barriers of
the AFC system or
industry that would
prevent the taxi owner
from adopting the AFC
system.
57

3.7.2 Interview Procedure
After receiving the first potential participant’s contact details from a taxi driver the
prospective participant was contacted. The purpose of the research was explained to
them and once the participant agreed to an interview, a time, date and place was
negotiated. The negotiated time and location was entirely up to the participant. This
was done to allow the participants to pick a location which they felt comfortable with
and a time that would not make them feel rushed or pressured. A day before the
interview took place the participants were called to confirm that the interview was still
to take place. This approach gave an opportunity to make alternate plans should a
problem arise.
Before the interviews began each participant was requested to sign a consent form
(refer to Appendix A). The purpose of the consent form was to inform the participant
of the purpose of the research, the level of confidentiality that would be applied to the
information provided, to provide the participant with contact detail should the
participant require more information about the research and ultimately, written signed
authorisation to interview the participant.
The AFC and CSC system was then explained to the participant in a basic manner
and as part of the explanation process some pictures were shown to the participants.
Making use of pictures made grasping the concept easier for the participants. The
pictures that were used for descriptive purposes can be found in Appendix B. After
the AFC and CSC system was explained to the participants the interview process
began.
The research data was collected over a period of three weeks from 4th September
through to the 21st September 2012. The interviews were on average between 45 -
50 minutes long. A semi-structured participant centred approach in conducting the
interview was used. The interview questions were open-ended. Probing was used
where responses were inadequate. According to Babbie and Mouton (2001:253-254)
probing is a method used to get the interviewee to further expand on responses that
have been given to get more information on the question that was asked. The
probing approach was useful during the interviews that were conducted. All
58

interviews we conducted in English which according to Neeley (2011) is globally one
of the primary languages used for business. Although the primary language of the
participants was not English the participants could understand the questions and
were able to respond to all the questions asked. Conducting the interviews in English
did not affect the responses from the participants.
Documenting of the interview
Interviews were recorded and transcribed where consent to do so was provided and
notes were taken during the interview as a backup measure should the recording
equipment fail, as recommended by Saldaňa (2011:39). However in some cases
participants were willing to be interviewed, but they did not want the interview to be
recorded. In these instances notes were made during the interview for analysis at a
later stage.
Field notes
Field notes were made after the interviews took place. Notes were made on the
environment, participant and atmosphere of where the interviews took place.
Transcription of the interview
All recorded interviews were transcribed. Saldaňa (2011:44) suggests that if the
researcher were to transcribe his/her own interviews it will provide him/her with
insight into the data. This was a long monotonous process but the transcription of the
data added value to the research.
3.8 Data Analysis
The data collected in this study was analysed using Creswell's (2009:185) six steps
for data analysis which are depicted below.
59

Figure 3.1: Creswell's Data Analysis in Qualitative Research
Source: Creswell (2009:185)
Step 1: Raw Data Collection and Transcription
This step involved collecting and sorting out all of the data collected during the
interview process. The raw data collected included the transcribed recordings of the
interviews, the notes made during each interview and the field notes that were made
after each interview.
Raw Data
Organising & Preparing Data for Analysis
Reading Through All Data
Coding the Data
Themes Description
Interrelating Themes
Interpreting the Meaning of Themes
Validatingthe
Accuracyof the
Information
6
5
4
3
2
1

Step 2: Read Through all Data
All of the material were read to get a sense of the messages that the participants
were trying to convey. This step was performed more than once in order to pick up
and pieces of information that may have been missed. Time was taken to identify
current challenges faced in the taxi industry and the perceptions of the participants
both positive and negative and the reasons on how they had come to their
conclusions about the AFC system.
Step 3: Coding of Data
The data was then coded, which finally lead to the true meaning of the information.
As part of the coding process all of the transcriptions were read from the recorded
interviews and notes from which similar topics were then clustered together.
According to Saldaňa (2012:3) in qualitative research, coding is the process of
identifying and marking segments of data with a short phrase or word. Inductive
coding was used and key participant responses were coded that were given and
then placed these codes into categories. According to Thomas (2003:1) inductive
coding is a method of coding where codes are created from raw data. This method
was used in order to condense the extensive data that was collected and to establish
links that addressed the aim and objectives of this research.
The topics were then given codes which were later categorised.
Step 4: Grouping of Codes into Categories
The identified codes were grouped into categories which fell under the following
headings
Table 3.3: Code Categories
CATEGORY RELATION TO RESEARCH
Biographical Information Additional information
Key Industry Challenges Identification of industry challenges
Awareness of AFC To determine the awareness and knowledge of
the AFC system
61

CATEGORY RELATION TO RESEARCH
The NDoT and its support for AFC To ascertain the views of the role of the NDoT in
encouraging the adoption of AFC systems.
Perceived Benefits of the AFC system from the
taxi owner’s perspective
To identify the perceived benefits to adopting the
AFC system
Perceived Barriers of the AFC system from the
taxi owner’s perspective
To identify the perceived barriers to adopting the
AFC system
Intention/decision regarding AFC adoption. To determine the factors that influenced the taxi
owner in making their decision to adopt or reject
the AFC system.
Step 5: Creation of Sub-Categories
The identified categories were further evaluated and it was discovered that sub
categories were needed to better report the data in a structured manner. For this
process axial coding were used where relationships amongst concepts as defined by
Bernard and Ryan (2010:270) were explored.
From the identified sub-categories themes were identified and reported on
accordingly.
Step 6: Final Interpretation
In interpreting the findings, the findings were discussed under the identified
categories and sub-categories. Recommendations for the AFC system which were
based on the collected information were then provided.
3.9 Pilot Study
According to Simon (2011), a pilot study is a small scale or trial run of a bigger
researcher or major study. Simon (2011) suggests that a pilot study does not
guarantee success in the main study, but it does however significantly increase the
chances of success. For this research a pilot study was conducted in order to
increase the chances of success.
62

Table: 3.4: Aspects of the pilot study addressed
ASPECT HOW IT WAS ADDRESSED IN THIS STUDY
Literature review An initial literature review was conducted and presented to a
product manager of contactless smart cards at an issuing bank
as well as two supervisors at the University of Johannesburg for
review.
Expert opinion The methodology of this research was presented to a product
manager of contactless smart cards at a card issuing bank.
Feedback on the recommended research approach was
received and the necessary adjustments were made to include
snowball sampling as well as in-depth interviews.
Feasibility consideration
• Goals and
objectives
• Resources
• Population
• Procedures
• Data gathering
• Possible errors
In order to ensure that the study was executable the various
aspects required for feasibility consideration were carefully
considered. Additional consultation was sought form the product
manager from the issuing bank to further mitigate the possibility
of possible errors.
Measurement instrument A pilot in-depth interview was conducted with a taxi owner in the
City of Tshwane
Source: Aspects from Strydom (2005:206-209)
3.10 Trustworthiness
Wimmer and Dominick (2003:159) define validity as the degree to which an
instrument measures what it is set out to measure. The approach used to ensure
validity, reliability and trustworthiness of the research stemmed from Guba's model of
trustworthiness for qualitative research as described by Krefting (1991:215). Krefting
(1991:215) suggests that Guba's model of trustworthiness is based on four key
aspects which consist of Truth Value, Applicability, Consistency, and Neutrality.
The Truth Value
The truth value relates to the level of confidence with the findings of the research.
After analysing the collected data the findings had to be tested and verified by
presenting the findings to a participant of the research who is familiar with the
phenomenon being studied who must agree with the findings (Krefting, 1991:215).
Member checking was also done. In order to further determine the accuracy of the
research the final report were taken back to two participants who confirmed and
verified the findings.
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Applicability
The collected data should have the ability to be applied to other groups. In other
words, it should have the ability to generalise the findings to other populations who
fall within the target population of the research (Krefting, 1991:216).
Consistency
This relates to the level of consistency of the data. The data collected should be able
to be consistent with the data collected from the same participants if the inquiry was
to be replicated (Krefting, 1991:216). Being able to code the data into similar groups,
it seems that the data collected will be similar if the research was replicated.
Neutrality
This relates to removal of bias in the research procedures and results. The main
criteria for a research to be considered as neutral is that the research should be
collected and represented in an objective manner free from bias (Krefting,
1991:217).
In order to meet the four key aspects of Guba's model of trustworthiness (Krefting,
1991:215), the following strategies in ensuring the internal validity of the research
was used:
• Data Triangulation: Data was not collected through use of a single source
multiple sources which included in depth face to face interviews, note taking
during the interview, making field notes after the interview, coding, creation of
categories as well as transcription analysis were used.
• Peer examination: A Doctoral lecturer and Doctoral student and lecturer in the
Marketing Department at the University of Johannesburg served as peer
examiners.
• Clarification of researcher bias: Limited research bias is present in this study as
there is not direct involvement in this industry.
• External auditor: The entire research project was also submitted to an external
auditor who was not familiar with the project provided an objective assessment of
the research.
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3.11 Ethical Concerns
According to Saldaňa (2011:24), researched cannot proceed with any action
necessary to achieve their research goals. Researchers must be ethical in their
research practices as there are moral and legal codes in place that addresses the
ethical treatment of the participants involved (Saldaňa, 2011:24). Wimmer and
Dominick (2003: 66) suggest that researchers must ensure that the rights of the
participants are not violated.
For this research, all measures to ensure that the research was ethical and all
participants involved in the research were comfortable to participate were taken. All
participants signed a consent form presented to them before the interview took
place. Where the participants were not comfortable to participate in the recording of
the interview, but still participate in the research, this was accomodated. All
participants of the research also remained anonymous.
The proposed research was also submitted to the Department of Marketing
Management’s Ethics Committee for approval.
3.12 Conclusion
This chapter described in detail the research design that was used to collect the
relevant data as well as how the collected data was analysed. A qualitative approach
was used for this research and data was collected through in-depth interviews where
the interview for analysis were recorded and documented. The collected data was
analysed by utilising Creswell’s steps for data analysis which involved coding the
data and placing the coded data into categories.
Chapter four of this research presents the results of the analysed data.
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CHAPTER 4
RESULTS
4.1 Introduction
This chapter presents the results of the research undertaken in this study. The
findings are presented around specific themes that address each of the research
objectives and research questions which aims to determine the view of selected
South African taxi owners regarding adopting an Automated Fare Collection (AFC)
system in the South Africa taxi industry. The chapter has been divided into four
sections.
In the first section outlines the biographic data of the sample population. The second
section highlights the levels of awareness and knowledge of South African taxi
owners of an AFC system. The third section presents the findings relating to the taxi
owners’ perceptions of the benefits, barriers and challenges associated with
adopting an AFC system. The fourth section provides insight into how South African
taxi owners see the role of the NDoT in adopting an AFC system.
4.2 South African Taxi Owners Interview Results
The approach used in analysing the research results from the in-depth interview
conducted is done with the use of the approach outlined by Cresswell (2009:185).
This approach was discussed in Chapter 3. The research results are presented in
accordance with the research objective it addresses which is outlined below.
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Table 4.1: Research Objectives and Associated Themes
Objective 1: To determine the levels of awareness and knowledge of an AFC system among
selected South African taxi owners
Theme: Understanding/awareness of AFC system
Objective 2: To determine the perceptions of the benefits, barriers and industry challenges to
adopting an AFC system of selected South African taxi owners
Theme: Taxi Owner Benefits
Theme: Commuter Benefits
Theme: Taxi Driver Benefits
Theme: Taxi Owner Barriers
Theme: Commuter Barriers
Theme: Taxi Driver Barriers
Theme: Owners Intended Decision Regarding the AFC System
Objective 3: To determine the views of selected South African taxi owners of the role of the
NDoT in adopting an AFC system
Theme: NDoT Support for AFC
4.3 Biographical Information
Table 4.2 outlines the biographical information of the 20 taxi owners interviewed in
the study followed by a brief discussion.
Table 4.2: Biographical Information (n=20)
Taxi Owner Gender Distribution
Male = 10% Female =90%
Racial Classification
African = 85% Coloured = 15% Indian =0% White = 0% Other = 0%
Age Group
Under 25yrs = 0% 25 – 34yrs = 0% 35 – 44yrs= 60% 45 – 54yrs = 30% 55+yrs = 10%
67

Language Preference
Afrikaans = 15% English = 0% Nguni = 15% Sotho = 70% Venda = 0%
Highest Level of Education
Less than grade 12 = 35% Grade 12 = 55% Tertiary = 10%
Number of Taxies Owned
2- 3 Taxies = 65% 4 – 6 Taxies = 20% 6+ Taxies = 15%
Number of Years in Operation
0 – 5yrs = 10% 6 – 10yrs = 65% 11-15yrs = 15% 15+yrs = 10%
Distance of Routes Travelled
10 - 20km + 60% 21 – 50km = 40% 51 – 100km = 0% 100+ = 0%
Owner Drives Taxi
Yes = 25% No =75%
Gender Distribution
From the participants that were interviewed only 10% (n=2) were women. This
industry still seems to be male dominated, but this data is an indication that women
are starting to enter the industry.
Racial Classification
The majority of the participants interviewed were African and only 15% (n=3) were
coloured. The high level of African participants could be attributable to their
geographic location as well as for historical reasons since there was a demand for
transport among the African population mainly due to political segregation as
described by Sekhonyane and Dugard (2004:14). According to Drabile (2012) white
taxi owners are basically non-existent in the short trip taxi industry and have rather
opted to transport school children or factory/company workers on a monthly payment
contract basis to and from work.
The majority of the participants fell within the age group of 35 – 44 years (n=12). This
number then starts to reduce in the age group 45 - 54 years (n=6) and then there is
further reduction in the 55+ years age group (n=2).
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Age
From the data it seems that individuals become taxi owners between the ages of 35
– 44 years and remain in the industry till they are around 55 years old. The
participants indicated that once taxi owners reach the group of 45 – 54 years old
they start to exit the taxi industry mainly due to the stresses of the industry and also
to pursue other business ventures. As a way to exit the industry with some money in
their pocket, these individuals then participate in the recapitalisation programme
initiated by the NDoT in 2005 and then make use of the R50 000 received in
exchange for their old taxi and invest the money received into other forms of
business.
Prior to the age of 35 years old, individuals could possibly still be saving the required
money to purchase a taxi and are either employed by an organisation or are in
another line of business. This information does not indicate that the older age taxi
owners (55+years) pass on their taxis to their younger members of their family.
Language
Language preference of the participants were more inclined towards Sotho which
was at 70% (n=14). The Sotho language consists of Sepedi, SeSotho, Tshwana. The
participants in this study were adequately literate in English and they were able to
understand and communicate. The language preference of the participants is mainly
due to the geographic characteristics of the population. Most of the people in the
area speak Sotho. The participants that spoke Nguni (n=3) are not originally from
this area indicated that they understood Sotho. The participants that were coloured
spoke Afrikaans as a first language.
Education
There were only a small number of participants that had a tertiary education (n=2).
This could be an indication that education was not a priority for the participants, but
rather making a living and supporting their family. The participants that were in
possession of a tertiary qualification were also only females and both of the
participants (n=2) were involved in the taxi industry for additional income. According
to Dickerson and Gentry (1983:226) one of the characteristics of early adaptors is a
high level of education which would contribute to a greater understanding of the AFC
69

system and therefore accelerate the rate of adoption. This information suggests that
the majority of the taxi owners would probably take longer to adopt the AFC system
as the supplier of this technology would have to educate the target market. The two
females who were more educated would possibly adopt this innovation more quickly
Number of Taxies Owned
The average numbers of taxis owned by the participants were between 2-3 taxis
(n=13). Participants indicated that it would not be wise for them to operate only one
taxi for the following reasons:
• high insurance costs for their vehicles;
• vehicle repayment cost; and
• general housing expense for their day to day living.
If a taxi was to break down and there was no income being generated, the taxi
owners would not be able to cover all of the above mentioned expenses. Meeting
their expenses is top priority as they could lose their income generating assets
through bank repossession or through a fatal accident where the vehicle is written
off.
Number of Years in Operation
The majority of the participants operated for between 6 - 10 years in the taxi industry
(n=13). As the years start to extend past 11 - 15 years taxi owners start to exit the
industry. This information ties in with the age group indicated and further confirming
that taxi owners are in this industry for around 10 years before they start to consider
exiting and exploring other forms of business. There is however still a small
percentage of taxi owners that have been in the industry for over 15 years.
Distance travelled
The majority of the participants operate in the CBD area of the City of Tshwane,
Attridgeville, Shoshanguve, Mamelodi and the Menlyn area. These areas are mainly
short distances and therefore the majority of the participants fall in the distance
between 10 – 20km (n=12). The participants that fell within the distance group of
between 21 – 50km travel between Soshanguve and Tshwane CBD (n=8).
70

Owner-Driver
The majority of the participants indicated that they did not drive their taxis. The
participants that drive their taxis do this where there is an emergency (driver is sick),
or to get a feel of how much their drivers are supposed to be bringing in (n=5),
particularly when fare adjustments are made in response to increasing costs e.g.
petrol increases. The participants who drive their taxi are able to recalculate how
much revenue their drivers are supposed to bring back with the new price
adjustment. The participants that don’t drive their taxis rely on their fellow taxi
owners to decide on a new rate that their drivers should bring in. This data suggests
that taxi owners are unable to arithmetically calculate their costs.
From the biographical information it seems as if the taxi industry is male dominated
and on average taxi operators are in the age group between 35-44yes old with the
majority having grade 12 education as their highest level of education. The levels of
education that the participants had could have a negative influence on the adoption
of the AFC system as indicated by Dickerson and Gentry (1983:226). A total of 75%
of the participants indicated that they also did not drive their taxis. This could be in
an effort to maintain a level of higher status than that of the taxi driver. Drabile (2012)
suggests that taxi owners are not considered to have high status jobs and if this is
placed into the context of the characteristics of early adopters taxi owners may not
adopt this innovation.
4.4 Research Results of Research Objective 1
among selected South African taxi owners
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Table 4.3: The Understanding and Awareness of an AFC system among SA
Taxi Owners
Theme: Understanding/awareness of AFC system
Responses Context
P1: Yes Made reference to the GTS
P4: Yes Made reference to the GTS and OS
P9: Yes Made reference to the CTS and OS
P10:Yes Made reference to the GTS
P13: No No reference made / no understanding
Legend
GTS = Gautrain System
OS = Oyster System (AFC system available in the United Kingdom)
72

Discussion
A total of 70% of the participants understood what an AFC system was and gave the
example of the Gautrain system. A total of 55% of the participants made reference to
the AFC systems in the United Kingdom further indicating that they were aware of
what an AFC system was. What was interesting was that none of the participants
made mention of the operational AFC system being used in the City of Cape Town
on the MyCiTi busses. The participants were also not clear on how the AFC system
functioned. An explanation of how the AFC system worked were provided and
participants were then able to clarify any issues that they did not understand. In
order to facilitate and aid the process illustrations were also used (refer to Appendix
B). Some of the participants could immediately identify some benefits and barriers
that would affect adoption of the AFC. Under instruction from a taxi association
chairperson, eleven (11) potential participants were not allowed to be interviewed.
When probed about this the chairperson was of the opinion that information would be
relayed to the government who would then use the information to plot something that
is not in favour of the taxi industry. This is an indication of the lack of trust and faith in
the South African government.
to adopting an AFC system of selected South African taxi owners
Perceived benefits of an AFC system
The benefits associated with the adoption of an AFC system as perceived by the
Taxi owners include benefits for the taxi owners themselves, the commuters, and the
taxi drivers and presented accordingly.
73

Table 4.4: The Perceptions of SA Taxi Owners of the Benefits for Them to
Adopting an AFC system
Theme: Taxi Owner Benefits
Responses Context
P1: CM , FC Participant was able to identify benefits
P2: CM, S, FC Participant was able to identify benefits
P3: S, FC, TR Participant was able to identify benefits
P4: S,TR, FC Participant was able to identify benefits
P5: CM, S, FC, TR Participant was able to identify benefits
P6: CM,BI,FC Participant was able to identify benefits
P7: S, CM,FM,BI Participant was able to identify benefits
P8: CM,FC,BI, Participant was able to identify benefits
P9: S,FC,CM,BI Participant was able to identify benefits
P10:FC,CM,S,BI Participant was able to identify benefits
P11: CM, S, TR Participant was able to identify benefits
P12: FC,S,TR,BI Participant was able to identify benefits
P13: S Participant identified minimal benefit
P14: FC, S Participant identified minimal benefit
P15: CM,FM,TR,S Participant was able to identify benefits
P16: FM,S,CM,BI Participant was able to identify benefits
P17: CM,S, FC Participant was able to identify benefits
P18: S, Participant identified minimal benefit
P19: BI Participant identified minimal benefit
P20: FM,S Participant identified minimal benefit
Legend:
CM = Cash management
FC = Fare Collection
S = Security
74

TR = Transaction Records
BI = Business Improvement
Discussion
Perceived Benefits: Taxi Owner
Taxi owners identified that the AFC system would help them with their cash
management and collection of fares. The fact that the collected funds are directly
deposited into their bank account increases their security as they are not exposed to
robberies at their homes or exposure to possible cash loss if their homes were to
burn down. Another benefit identified was that taxi owners would have transaction
records and also get a better idea of how many commuters pass through their taxis
on a regular basis. This information could also help them with route planning.
Currently they are unable to do any of the above mentioned functions efficiently and
introducing the AFC system could improve their business management. The taxi
owners also did not seem to mind the associated costs of the AFC system and felt
that it was a fair price to pay for the services provided by the system. A participant
said: “The monthly and transaction fees are fine, If the money in the end goes
directly to my account I will be happy” Most of the identified benefits highlighted by
the taxi owners are in line with the benefits that were identified by the TCC fare
collection Study (2000:28).
Table 4.5: The Perceptions of SA Taxi Owners of the Benefits for Commuters
to Adopting an AFC system
Responses Context
P1: CFS,NC,C Participant identified perceived benefits
P2: C, NC, CFS Participant identified perceived benefits
P3: CFS, NC ,C Participant identified perceived benefits
P4: NC Participant identified minimal perceived benefits
P5: C, NC Participant identified minimal perceived benefits
P6: NC, C Participant identified minimal perceived benefits
75

Responses Context
P7: CFS, NC, ETU Participant identified perceived benefits and mentioned the
solution was easy to use
P9: NC,CFS Participant identified minimal perceived benefits
P10:C, NC,CFS Participant identified perceived benefits
P12: NC, CFS Participant identified minimal perceived benefits
P13: C, Participant identified minimal perceived benefits
P15: ETU, C Participant identified perceived benefits and mentioned the
P16: C, ETU,NC Participant identified perceived benefits and mentioned the
P17: C, NC, CFS Participant identified perceived benefits
P18: C Participant identified minimal perceived benefits
Legend
NC = No Need to Carry Cash
CFS = Commuters Feel Safe
C = Convenient
ETU = Easy to Use
Discussion
Perceived Benefits: Commuter
The commuter benefits identified by the taxi owners included the fact that commuters
would no longer have to carry cash. This would be beneficial to commuters that
came from the more dangerous and unsafe areas. In addition the fact that this
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system was interoperable and could be used to pay for all forms of transport
provided the commuter with additional convenience.
Table 4.6: The Perceptions of SA Taxi Owners of the Benefits for Taxi Drivers
Theme: Taxi Driver Benefits
Responses Context
P1: NB Participant could not identify any benefit for the taxi driver
P7: NCC Participant was able to identify only one benefit
P10:NB Participant could not identify any benefit for the taxi driver
P17: NCC Participant was able to identify only one benefit
P20: NB Participant could not identify the benefit for the taxi driver
77

Legend
NB = No Benefit
NCC = No Need to Count Change
Discussion
Perceived Benefits: Taxi Driver
Taxi owners could not find any real benefit to the taxi driver. The AFC system was
seen as more of a mitigating solution for some of the drivers’ misdemeanours. This
could affect taxi owner’s decision to adopt of the AFC system because if drivers don’t
agree with the system they could sabotage the system leading to more loses than
what taxi owners may find acceptable. 10% of the participants could only identify one
benefit for the driver and that was the removal of the task of counting and giving
change back to the commuter after they had paid for their fare with a large note.
Drivers currently shift this task to the commuter who sits in the front with him.
Perceived barriers to the adoption of an AFC system
The barriers to the adoption of an AFC system perceived by the Taxi owners include
barriers for the taxi owners themselves, the commuters, and the taxi drivers and
presented accordingly.
Table 4.7: The Perceptions of SA Taxi Owners of the Barriers for them to
Responses Context
P1: CGE, RA A possible hindrances to the adoption of the AFC
P2: DR, CGE, ETT A possible hindrances to the adoption of the AFC
P3: RA, CGE, ETT A possible hindrances to the adoption of the AFC
P4: DR, RA, ETT A possible hindrances to the adoption of the AFC
P5: DR, CGE A possible hindrances to the adoption of the AFC
P6: ETT, DR, CGE A possible hindrances to the adoption of the AFC
P7: CGE, RA, DR A possible hindrances to the adoption of the AFC
78

Responses Context
P8: ETT, CGE A possible hindrances to the adoption of the AFC
P9: DR, CGE A possible hindrances to the adoption of the AFC
P10: DR, RA A possible hindrances to the adoption of the AFC
P11: RA,CGE A possible hindrances to the adoption of the AFC
P12: ETT, CGE, DR A possible hindrances to the adoption of the AFC
P13: DR There was a strong focus on resistance from the driver
P14: RA There was a strong focus on speed of which commuters
would adopt the AFC technology
P15: RA, DR A possible hindrances to the adoption of the AFC
P16: CGE, ETT A possible hindrances to the adoption of the AFC
P17: DR,RA A possible hindrances to the adoption of the AFC
P18: RA There was a strong focus on speed of which commuters
would adopt the AFC technology
P19: CGE There was a strong focus on speed of which commuters
would adopt the AFC technology. This would make the
system expensive with limited transactions taking place
P20: CGE Participant was concerned about the costs of the solution
Legend
CGE = Costs Could Get Expensive
RA = Rate of Adoption for Commuters
ETT = Exposure to Tax
DR = Drivers may Have Difficulty Understanding AFC
Discussion
Perceived Barriers: Taxi Owner
Although the costs associated with the AFC system were acceptable, taxi owners
were concerned with the rate of adoption of the innovation by the drivers and
commuters. Some of the associated fixed costs like terminal rental and internet fees
would be on-going even during the introductory phase. Should the rate of adoption
be slow these fixed costs will unfortunately lower taxi owners’ profits during this
79

period. Taxi owners are not willing to incur this additional expenditure. In the event
that the AFC system becomes successful taxi owners will be exposed to additional
tax payments as their transactions will be running through their business bank
account. Although taxi owners do declare tax, they don’t declare the true value of
their income. If all of their income was declared, the taxi owners feel that the net
income received after their taxes have been paid would be less than what they are
currently receiving.
Taxi owners also feel that the promotion of the AFC system will be their responsibility
and promoting and marketing is not part of the business that they are in. Currently
taxi owners relay messages that they would like commuters to know via their taxi
drivers. This includes route changes and price increases. In promoting the CSC, taxi
owners would rely on taxi drivers to inform and educate the commuters about the
AFC system and how to use the CSC. This could be difficult for taxi drivers, because
they may also have some difficulty in understanding the AFC system themselves.
This would have the following negative impacts for the taxi owner:
• disruption of business;
• incorrect and incomplete information given to commuters; and
• owners would have to have a dispute resolution process in place should the card
malfunction or deduct money twice. This does not occur when cash is utilised.
The price is fixed and the commuter receives their change with no issues.
Although the AFC system may provide taxi owners with better administrative control,
it could disrupt normal business operations especially in the introductory phase. The
taxi owners would have to evaluate the benefits and barriers of adoption in order to
determine if the benefits outweigh the costs.
Table 4.8: The Perceptions of SA Taxi Owners of the Barriers for Commuters to
Responses Context
P1: LF,LC,ITCO Perceived commuter barrier identified by participant
80

Responses Context
P2: LF, LC, ARC Perceived commuter barrier identified by participant
P3: LF,ITCO Perceived commuter barrier identified by participant
P4: LC, LF, ITCO,ARC Perceived commuter barrier identified by participant
P5: LC,LF,ARC Perceived commuter barrier identified by participant
P6: LF,ITCO Perceived commuter barrier identified by participant
P7: LF, LC, ITCO Perceived commuter barrier identified by participant
P9: LC, ITCO Perceived commuter barrier identified by participant
P10: LC, ARC Perceived commuter barrier identified by participant
P11: LF, LC Perceived commuter barrier identified by participant
P12: LF, LC, ITCO Perceived commuter barrier identified by participant
P13: LF,LC Perceived commuter barrier identified by participant
P14: LF, ARC Perceived commuter barrier identified by participant
P15: ITCO,LC Perceived commuter barrier identified by participant
P17: LC,ITCO, ARC Perceived commuter barrier identified by participant
P18: LF Perceived commuter barrier identified by participant
P19: LF Perceived commuter barrier identified by participant
P20: LF, ARC Perceived commuter barrier identified by participant
Legend
LF = Load Fee
LC = Load Channels
ITCO = Inability to Cash Out
ARC = Access to Replacement Cards
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Discussion
Perceived Barriers: Commuter
Load Fee
Taxi owners seem to think that the commuter will have trouble seeing any real
benefit from the CSC as their true value of money will be diminished by the 2.5%
load fee. This will be a major hindrance on commuter uptake. Taxi owners feel that
the majority of commuters that make use of taxis belong to the lower end of the
market and a sum as little as R0.50 means something to them. The collective charge
of 2.5% every time a commuter loads their card could amount to a trip to a specific
location depending on the amount being loaded. Furthermore a large majority of
commuters also don’t have bank accounts. This suggests that they have never made
use of a banking product before and it may be difficult for them to understand how to
load money onto the card and how this money is paid out to the taxi owner.
Commuters could potentially fear the technology due to its complexity.
Load channels
Another issue mentioned by taxi owners was the available load channels, which are:
• ATMs;
• bank branches;
• internet banking; and
• merchant loads.
The majority of these channels would be suitable for individuals that have easy
access to the internet and ATM’s that are located in close proximity to where they
stay. For the common commuter, the available load channels could be an
inconvenience as these channels are in most cases not easily accessible. It requires
the commuter to get to a specific location to fund their cards, which means that they
would potentially need to catch a taxi to get there. The majority of the common
commuters also do not have access to internet banking and this load channel
therefore has no value to them. A participantsaid: “we don’t have many ATM’s in
Attridgeville and they are mostly only at the shopping centre. As for the internet! Ahh
no, that won’t work”.
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Inability to cash out
Taxi owners questioned the inability of the commuter to withdraw cash out of the
card. There could be instances where the commuter has loaded money onto the
card and there is a family emergency and cash is required urgently. Also where there
are taxi strikes and the commuter would like to make use of an alternate mode of
transport that does not accommodate AFC. In this instance they will not have access
to their money. The value proposition in these contexts does not seem strong
enough for the commuter.
Access to replacement cards
The participants also indicated that cash is easily accessible and readily available. If
the commuter were to lose their card, a replacement card would not be readily
available and the cost of the replacement card is very high. This will further reduce
the value proposition of the AFC system. Commuters would then revert back to cash
until they are able to get a replacement card. This opens up opportunities for drivers
to pocket the money and not hand it over to taxi owners.
The responses given by the taxi owners were in many aspects in line with the
barriers to innovation adoption highlighted by Ram and Sheth (1989:6-7). The usage
barrier relates to the load channels available to the commuter, which in many cases
may not be easily accessible to the average public transport commuter. The value
barrier could relate to the diminished value of the actual value of the money loaded
on to the card, this could mean one less trip for the commuter. The tradition barrier
relates to a combination of variables identified by the taxi owners. This includes the
inability to withdraw money from the card in the case of an emergency. This means
that money is locked up in the card and is not readily available in comparison to
cash.
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Table 4.9: The Perceptions of SA Taxi Owners of the Barriers for Taxi Drivers
Theme: Taxi Driver Barriers
Responses Context
P1: NEI Barrier to AFC adoption – Stakeholder rejection
P4: NEI, I Barrier to AFC adoption – Stakeholder rejection
P5: I, NEI Barrier to AFC adoption – Stakeholder rejection
P7: I Barrier to AFC adoption – Stakeholder rejection
P10:NEI, I Barrier to AFC adoption – Stakeholder rejection
P16: I, NEI Barrier to AFC adoption – Stakeholder rejection
Legend
NEI = No Way to Make Extra Income
I = Inconvenience
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Discussion
Perceived Barriers: Taxi Driver
The taxi owners are of the opinion that the AFC system would disadvantage the
driver the most and that they would resist the system totally. Taxi drivers would have
no way of making their extra income and would therefore look for methods to
outsmart the AFC system. According to the taxi owners this could include disabling
the card reader, accepting cash and then reconnecting the reader. Taxi owners
indicated that some of their taxi drivers currently disconnect the odometer and
reconnect it so that the taxi owner can not determine how many kilometres they have
actually travelled. Due to the assumptions of disconnecting the AFC system and then
reconnecting it at a later stage the taxi owners suggest that incorporating the AFC
system into their taxis could actually lead to more money being stolen that what they
are currently experiencing.
Table 4.10: Intended Decisions Regarding the AFC System
Responses Theory/Context
P1: NRTA, Dr Not yet ready to adopt
P2: NRTA, Dr, CR Not yet ready to adopt
P3: NRTA, LGS Not yet ready to adopt
P4: LGS, WD Would adopt the AFC solution but is influenced by the
stakeholders in the industry and lack of government support.
P5: NRTA, CR, DR Not yet ready to adopt
P6: NRTA, CR, DR Not yet ready to adopt
P7: NRTD Not yet ready to adopt
P8: CR,DR Not yet ready to adopt
P9: WD, DR Would adopt the AFC solution but is influenced by the
stakeholders in the industry
P10:NRTA Not yet ready to adopt
P11: NRTA Not yet ready to adopt
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P12: WD, DR, CR Would adopt the AFC solution but is influenced by the
P13: NRTA, LGS, CR Not yet ready to adopt
P15: CR, DR Not yet ready to adopt
P16: WD, DR, CR Would adopt the AFC solution but is influenced by the
P19: NRTA, DR Not yet ready to adopt
Legend
DR = Driver Resistance
CR = Commuter Resistance
LGS = Lack of Government Support
NRTA = Not Ready to Adopt
WD = Would Adopt
Discussion
Taxi Owners Intended Decision Regarding the AFC System
The participants were able to identify the benefits of the AFC system and were
comfortable with the associated costs of the system. The participants however
expressed concern for the two other stakeholders within the taxi industry. These
stakeholders included the commuter and the taxi driver. Participants indicated that
the migration from cash to card may be a bit too radical for the majority of
commuters as cash is what they are used to. Most commuters that make use of
taxies on a daily basis are also at the lower end of the market. The participants
indicated that the load fees attached to the CSC card will be too expensive for the
average commuter.
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The participants also expressed that through past experience with their drivers, their
drivers will possibly look for loopholes in the AFC system and exploit the identified
loopholes by stealing money from the taxi owners. Participants indicated that this
could lead to more financial loss than what they are currently experiencing as they
will be solely reliant on the AFC system and no more expecting physical cash. The
other aspect of incorporating the AFC system into their taxis is that the system would
expose them to tax. The majority of the participants are currently not paying or are
only making partial payments towards tax in their cash based business. One of the
participants said: “We only declare some of our income and pay tax on that”. A total
of 70% of them indicated that they are not yet ready to adopt the solution.
Key Industry Challenges
The key industry challenges that were mentioned by the owners included:
• exploitation of loopholes identified by drivers in the business;
• financial challenges;
• replacement of drivers; and
• a lack of government support.
Each of these issues is discussed in more detail below.
Exploitation of Loopholes Identified by Drivers:
Taxi owners see their drivers as extremely opportunistic since they look for every
available opportunity to steal from their owners. All of the participants mentioned this,
but they have accepted it as part of their business. One of the participants mentioned
"we just have to manage how much they steal from us".
In addition the taxi owners stated that the majority of the drivers are of the opinion
that they are smarter than their employers. Drivers will study the taxi owner’s
movement patterns. When taxi owners are not available to check on taxi drivers or
assist them when a problem arises, for example when a taxi breaks down, taxi
drivers use this as an excuse for not having made enough money. One of the
participants said "my driver sometimes gives me a call to ask to see me and if I can't
see him immediately or within 2 hours, he kind of knows I am not around".
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In instances where a ticketing system was introduced to monitor and counter check
the money that was made during the course of the day, taxi drivers would then
partner with rank marshals to manipulate business performance for the day. Seven
(7) participants mentioned this, which may indicate that they did not see any benefit
from using a ticketing system.
In some instances where taxi owners have a large fleet of taxis, taxi drivers collude
with each other to steal one or two taxis from the taxi owners. These drivers then
move to another town or province and become taxi owners themselves. For example
one participant mentioned "last year one of my taxis was stolen from a new driver I
just employed and the vehicle was recovered in Limpopo". Taxi drivers do not only
collude to steal taxis from their employers, but they also steal some of the day’s
takings over a period of time. They are then able to purchase their own taxi to
become an owner. Six (6) participants made mention of this.
Financial Challenges
Taxi owners have seen and tried to make use of ticket based systems, but these
systems are only useful for longer distances. The level of administration and
practicality of ticket based systems is not suitable for the shorter distances mainly as
commuters board and exit the taxi at any point. This opens opportunities for fraud
whereby drivers and rank marshals at the taxi rank state that they sold fewer tickets
than they actually did. Taxi owners have no way of cross checking with drivers or
rank marshals and this has led to owners only accepting cash from commuters. This
could also be said of cash based systems. In the taxi industry taxi drivers tend to
pocket the money that they make from commuters who enter the taxi along its route.
All of the taxi owners indicated that they were aware of their drivers stealing some of
their money and the majority indicated that around 30-35% of their potential income
was not handed over to them. Through discussion with their fellow taxi owners it was
collectively concluded that the most effective way of tackling this issue was to
enforce a rule on their drivers that they must bring in a daily fixed amount and
anything made over and above the required fixed amount could be kept by the
drivers.
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Where there are increases in the petrol prices some taxi owners actually drive their
own taxis to determine how much money can be made in a day with the new rate
and then they determine the new rate the drivers need to bring back to the owners
and the difference is kept by the driver. On days where the drivers are not able to
meet their target, they are to use their profits from other more successful days to
make up the short fall. Taxi drivers that perpetually default on the required amount
are fired and replaced with new drivers. One of the participants said: “If they don’t
bring me my money regularly I simply fire them”.
According to the TCC Fare collection Study (2000:28) better financial control,
improved management of information and fraud reduction would be some of the
operational advantages that would be achieved with the use of an AFC system.
According to the participants, taxi owners are experiencing operational challenges
and financial loss of between 30-35% of revenue and it seems as if no solution has
yet been found to reduce the fraud and theft.
Replacement of Drivers
Driver turnover in the taxi industry seems to be high due to various reasons such as:
• theft of vehicles from owners;
• failure to bring in the required daily amount;
• reckless driving by drivers which has led to them being arrested; and
• some owners use drivers who don’t have valid driving licenses. These drivers are
sometimes caught and arrested and have to be replaced.
Driver replacement in the industry seems to be a challenge as the number of
reliable, trustworthy drivers is minimal. Taxi owners have to carefully assess drivers
as they hire them as a new trend has emerged. Where drivers are fired/replaced
they notify unemployed drivers that a particular owner is looking for a new driver.
They then give drivers all the information about the taxi owner such as, how much
the owner will expect them to generate on a daily basis, their management
weaknesses and the various other opportunities where the driver can use to steal
from the owner. In extreme cases, disgruntled drivers plan to steal taxis from the
owner with the newly hired driver.
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Taxi owners have to spend some of their time physically driving their own taxis when
they are unable to find a suitable driver. They have to do this because if their
allocated route is not serviced by their vehicles another taxi owner could take their
route and it could be difficult for them to get the route back unless their taxi
association intervenes. An owner driving their own taxis does not seem to be a
regular practice among taxi owners as seen in Table 4.2 only 25% of the participants
interviewed drive their own taxis. A participant said: “I never drive my own taxi
because my other drivers will not take me seriously, I always find someone else to
drive”.
Lack of Government Support
The participants’ opinion of government was very negative. A total of 70% of the taxi
owners did not want to be interviewed for fear that they may be pinpointed by fellow
taxi owners as supplying the government with information. This topic seemed to be
very sensitive to the majority of the participants. The participants did however
indicate that in 2005 the NDoT initiated a recapitalisation programme where taxi
owners were asked to surrender their own taxis for scrapping and they would get
new replacements supplied by the government. However this was not what
happened. A participant indicated that at the time this was the message that was
conveyed to them. Instead taxi owners were asked to scrap their old taxis and when
they did so they would receive a payout of R50 000 towards a new taxi. The amount
that was given back is insufficient for the taxi owner to purchase a new taxi "the price
of a new Sesfikile Toyota Taxi is around R300 000". As a result some taxi owners
would rather make use of their old taxis until they could no longer function while
others saw this as an opportunity to swiftly exit the industry. Those who exited then
took the R50 000 per taxi and went into other forms of business.
Although taxi owners feel that the introduction of various forms of transport is a
positive thing for the commuter, for the taxi owner they are a threat to their income
generation and survival. For example the introduction of the Rea Vaya bus service in
Johannesburg, which charges a significantly lower fare price than taxis, has led to
commuters switching to the Bus Rapid Transit (BRT) services. In the City of
Tshwane the local municipality announced that they would also be including BRT
services to its local public transit offerings. Taxi associations within the City of
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Tshwane have already been negotiating with the municipality and it seems as if taxis
may be totally moved out of the city and their licenses purchased.
Taxi owners in Tshwane are concerned about how they will sustain themselves once
the money they have received from the municipality’s purchase of their licences has
been utilised to pay daily living expenses. Taxi owners operating in Tshwane just can
not be allocated to other zones such as Atteridgeville, Mamelodi or Shoshanguve as
these areas are already under the control of other taxi associations and there is no
room to absorb any more taxis (Drabile, 2012). Taxi owners perceive that the
government is trying to get rid of them meanwhile they believe that they are
providing their communities with a valuable service.
NDoT in adopting an AFC system
Table 4.11: The Views of Selected SA Taxi Owners of the Role of the NDoT in
NDoT Support for AFC
P1: NA No influence on the adoption of AFC
P9 NA No influence on the adoption of AFC
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NDoT Support for AFC
Legend
NA = Not Aware
Discussion
All of the taxi owners were not aware of the integrated transport network that the
NDoT has envisioned and this had to be explained to them (n=20). After the
explanation and the taxi owners understood the vision, all the participants indicated
that the NDoT’s vision would have no influence. Even if individual taxi owners
wanted to incorporate the AFC system into their taxis, they could not do so, unless
all members belonging to a particular taxi association agreed to adopt the AFC
system. This goes back to the concept of the systems theory where components are
interdependent of each other in order for the system to function. The NDoT has no
influence on the adoption of the AFC system. The participants have indicated that
drivers and commuters will have significant influence in their adoption of the AFC
system.
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4.7 Conclusion
Taxi owners were able to identify the perceived benefits and barriers from a taxi
owner perspective, a commuter perspective and a driver perspective. Some of the
perceived barriers identified by the taxi owners could result in the rejection of the
AFC system. This is mainly due to the fact that in order for the AFC system to
properly work, the three highlighted stakeholders; taxi owner, commuter and driver
all need to support the system. Although there is support from the NToD towards the
adoption of this innovation none of the participants were aware of this and even if
they were aware of the support from government, they suggested that there would
be no influence in the adoption of the AFC solution. The participants that indicated
that they would be willing to adopt the innovation were still influenced in their final
decision by the perceived barriers they were able to identify from the commuter or
driver perspective.
Although participants were able to see the operational benefits of introducing an AFC
system into their current operations, it was also clear from their responses that there
is heavy influence from the stakeholders within the taxi industry especially from the
drivers. This is a big obstacle in seeing taxi owners moving forward with the decision
to adopt the innovation.
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CHAPTER 5
CONCLUSIONS AND RECOMMENDATIONS
5.1 Introduction
This chapter concludes the research study by relooking at the objectives of the
research, the limitations of the research finally summarising the outcomes of the
research and providing recommendations for further research.
5.2 Conclusion of Findings Related to Research Objectives
The current cash based payment to taxi drivers by commuters facilitates cash theft
and money laundering by taxi drivers. Ndebele (2011) highlighted the points of
opportunity for cash theft and money laundering activities as some of the challenges
of the taxi industry. The introduction of an AFC system may address the issues
associated with a cash based payment system. The NDoT and the Minister of
Transport with his amendments to the land transport act on the 17th
of June 2011
support the introduction of the new AFC system. However, for an AFC system to be
adopting such a system. Therefore the focus on this study was to determine:
5.2.1 Research objective 1: Taxi Owners Awareness and Knowledge of an
AFC system
In general, the taxi owners were aware of the AFC and a basic understanding of how
it worked was displayed by the majority of the participants. Many references were
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made to the Gautrain card found in South Africa and the Oyster card found in the
United Kingdom. Despite the introduction of AFC systems in South Africa in the bus
transit environment with the MyCiTi bus implementation in the City of Cape Town,
the majority of the taxi owners were not aware of the AFC system in the City of Cape
Town. This could be mainly due to marketing that could have potentially only been
concentrated in the Cape Town area. The lack of knowledge of the AFC bus
implementation in the City of Cape Town is an indication that taxi owners do not
actively seek out information on developments in the transport industry in South
Africa. Taxi owners may have heard of the Gautrain system and the London Oyster
card, but they are more concerned with what is happening in their immediate
environment and how it may affect them.
The taxi industry seems to play a passive role in obtaining information regarding
innovations within their industry which supports statements made by Rogers
(1962:164). Taking the levels of education into consideration, only 10% of the
interviewed participants had tertiary education and this could be a factor for the
passive approach to innovation information seeking. It can be concluded, based on
the findings of this research, that taxi owners have limited understanding and
knowledge of the AFC system, which pose a challenge for the adoption of this
innovation.
5.2.2 Research objective 2: Taxi Owners Perceptions of the Benefits, Barriers
and Challenges to Adopting an AFC system
The taxi owners were able to identify benefits to themselves and the commuter
regarding the AFC solution. Benefits to the taxi owner were mainly operational
benefits and benefits to the commuter were mainly focused on security. There were
no real perceived benefits to the driver that could be identified by the taxi owners.
The solution was seen to be more of a threat to taxi drivers by closing the gap for
them to steal from taxi owners. Taxi owners felt that this would potentially lead to
machine sabotage and ultimately greater loss of income to them. This is especially
relevant if taxi owners are completely reliant on the AFC system and have no way of
tracking physical cash collection that the taxi driver may collect.
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Taxi owners indicated that the biggest barrier that they could identify was their
exposure to tax. Formalising the fare collection process and tying the income to their
bank account will expose the taxi owners to tax, which, it seems, they are not willing
to pay. From a commuter perspective the perceived barriers that were identified
were the card load channel options, the cost of the card and the perceived
convenience for using the card to justify the load fee applied to each and every load.
From a driver perspective, taxi owners suggest that the whole system is a barrier to
taxi drivers and they will then be the biggest resistors to the innovation. This is
mainly due to the fact that the system will remove the opportunity for taxi drivers to
steal money from taxi owners.
Key industry challenges as perceived by taxi owners were mainly focused around
limited routes available, which according to the taxi owners is mainly due to the
various forms of public transport that is being introduced by government i.e. buses
and trains. Taxi owners feel as if the government is trying to push them out of the city
centres and suggest that the government is not supporting their industry enough.
Drivers are also a problem for taxi owners. Taxi owners need drivers, but drivers
have a habit of exploiting loopholes in the taxi business and end up stealing money
from the taxi owners. Taxi owners have accepted this issue and replace drivers that
they feel are not delivering.
Being a cash based business does not seem to bother the taxi owners and it actually
seems to fit in well with the type of commuter base they transport and the way taxi
owners pay their taxi drivers. Ndebele (2011) highlighted challenges from a more
holistic perspective and none of the highlighted challenges were mentioned by the
taxi owners except for cash theft within the taxi industry by taxi drivers.
Taxi Owners intended Decision to Adopting the AFC System
From the analysis of the data, it seems as if the taxi owners are not in favour of
adopting an AFC solution. It may however be considered in future. This conclusion is
drawn from the following:
• Exposure to tax, which taxi owners are not willing to pay.
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• Usability of the product. The product may seem like an easy payment instrument
to use but for the older commuter, it may be extremely complicated and
overcoming the tradition barrier may pose to be difficult.
• There is no liquidity in the CSC card. Commuters are used to cash not for only
their transport needs but also for personal reasons. The inability to withdraw cash
out of the product is seen as a serious limitation.
• Taxi owners suggest that the CSC is too expensive for the normal commuter.
• The potential risk of system sabotage by taxi drivers. Taxi drivers are constantly
looking for loop holes in the business to defraud taxi owners. Taxi owners
suggest that if a loophole was discovered in the AFC system they could
potentially lose more money that what they are currently losing.
Although taxi owners were able to identify operational advantages from making use
of the AFC system which were in line with the operational advantages described by
the TCC fare collection Study (2000:28), benefits identified for the commuter were
limited and not convenience related as suggested by Cornelius (2012c). There was
also no real benefit that was identified for the taxi driver.
Ram and Sheth (1989:6-7) had identified five barriers to innovation adoption and
upon further analysis this did not affect only the commuter but it also affected the taxi
driver. The usage barrier had the most impact for the taxi driver as the AFC system
is complexly different from what the drivers are used to using and it would potentially
create a barrier for them to enrich themselves. This is a definite benefit to the taxi
owner from an operational perspective but also a definite barrier to the taxi driver.
Due to past experience taxi owners were convinced that this would cause drivers to
exploit loop holes within the system which would ultimately affect the taxi owners
fare collection as well as revenue. What was initially thought to be a definite benefit
to the taxi owner has turned into a definite barrier.
This goes back to the systems theory where all components that make up the
system need to work in harmony. In this case the taxi owners suggested that not all
stakeholders are receiving value and benefit that is satisfactory from the AFC system
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and therefore has the potential to reject the innovation which will in turn affect the
whole system. These points also pose a threat for the adoption of the innovation.
5.2.3 Research Objective 3: Taxi Owners Views of the Role of the NDoT in
None of the taxi owners understood the vision of the NDoT’s support for AFC. The
vision of the NDoT had to be explained to all the taxi owners and after explaining and
receiving a response, it was clear that the NDoT would have no influence on taxi
owners on the adoption of the AFC system. Although the NDoT does supports the
industry and is making an effort to elevate the industry to that of first world countries
through amendment to the land transport act on the 17th of June 2011, taxi owners
seem to once again be passive in their information gathering.
Despite the fact that taxi owners openly admitted to not paying taxes on their income
or only partial tax payment on income declared, taxi owners suggest that the
government has shown no interest or support for the taxi industry. The taxi owners
have rather suggested that the government is more in favour of the commuter and
even subsidises the various forms of public transport for the commuter. Taxi owners
suggest that this commuter support that government is providing is hurting their
business rather than adding value or complementing their operations.
From the findings of this research 0% of the participants were aware of the vision
and support the NDoT was providing for AFC. It was almost as if the NDoT did not
exist. There was therefore no influence that came from the NDoT that would
motivate the taxi owners to adopt the AFC system.
5.3 Recommendations
The South African taxi industry is a complex and dynamic industry with many
traditions and characteristics. These traditions and characteristics include the use of
cash by commuters and theft of cash by taxi drivers which taxi owners have come to
accept to a certain degree. Based on the research findings, in order to direct and
convince taxi owners to adopt the AFC solution, the introduction of an AFC system
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could be done through a geographically phased two-step process. The two step
geographically phased roll out of the AFC system in the taxi industry could first
involve (Step 1) introducing the AFC system and CSC card to the common taxi
commuter within the Cape Town area and then expose the system to a wider
commuter audience. The exposure of the system and the CSC to a wider audience
could form part of Step Two of the geographically phased roll out approach.
Leveraging of AFC Bus Implementations in Key Metropolitan Areas
Within large metropolitan areas where there are bus AFC implementations, taxi
implementations could take place in these regions and leverage off the exposure that
commuters have received with the AFC bus implementations. It is expected that
commuters in large metropolitan areas are more regularly exposed to technological
advancements and can be considered as early adaptors when you compare their
characteristics as suggested by Dickerson and Gentry (1983:226) with commuters
that reside and work in the rural areas of South Africa. AFC taxi implementations
could also be limited to areas where AFC bus operators operate and the two modes
of transports can complement each other. This will be possible, because the CSC is
interoperable and it will work both on the taxi and the bus.
Exposure to a Wider Audience: National Roll Out Approach
As bus AFC implementations occur in other metropolitan cities taxi implementations
could follow and leverage of the exposure commuters receive from utilising the bus
services within those areas. It is expected that initial exposure to the technology will
ease the decision to adopt the technology by taxi owners, commuters and drivers.
During this process the NDoT can get involved and put mechanisms in place to
support the adoption of the AFC, such as financial assistance and workshops to train
and further expose taxi owners to the AFC system. During business planning
sessions the NDoT could invite taxi associations to the sessions. This will ensure
that taxi owners are aware of the direction that the NDoT wants to take in order to
achieve their set goals and this will give taxi owners an opportunity to voice their
recommendations on how the taxi industry should be shaped. If the NDoT were to
take this approach they may start to see themselves having better influence within
the taxi industry.
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To encourage commuter use of the CSC, banks producing this product could
consider wavering the load fees for cards used in the taxi industry. By wavering the
load fees for taxi commuters the cost to use the card will be more affordable for the
average commuter. The cost of the card will still apply, but it is expected that the
reduced cost of using the card will encourage more commuters to take up the CSC
card. Banks could also ensure that customer education campaigns are done in all of
the official South African languages to ensure that all commuters are able to
understand the CSC and the AFC system as well as the benefits and convenience
that they can enjoy if they are to make use of the CSC card.
In terms of providing a solution that will address the issue of potential sabotage of
the AFC system by taxi drivers, it is suggested that a camera solution inside the taxi
that will give the taxi owner the ability to monitor their drivers be investigated.
5.4 Limitations of Research
This research was limited to only taxi owners that operated in the City of Tshwane
and did not venture out of this region. Only taxi owners that had two taxis or more
were considered for this research because of the higher probability of experiencing
more business challenges. A small sample consisting of only 20 participants was
used
5.5 Recommendations for Future Research
Recommendations for future research are based on the information gained from the
literature review and the research findings and include:
• To duplicate this study in other major metropolitan areas or cities in South Africa
to obtain a more representative view from South African taxi owners regarding
the possible adoption of an AFC system.
• To investigate the views of the other stakeholders in the South African taxi
industry i.e. Taxi associations, commuters and the drivers themselves.
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• To investigate whether the AFC system and CSC offering is the correct solution
for the South African taxi industry.
• To investigate if the current majority public transport commuter base has access
to internet banking, ATM facilities and other alternative load channels and if these
channels are a convenience to them or if new more convenient channels need to
be developed.
• To investigate the current solutions that are available to taxi owners to monitor
taxi drivers who intend to sabotage the AFC system and the cost implications to
the taxi owners.
5.6 Conclusion
The taxi industry is made up of a number of stakeholders which includes the taxi
owner, the drivers, the commuters and the government. Should all the identified
stakeholders accept the AFC system, there needs to be complete migration from
cash to card payments in order for the taxi owners to realise operational benefits.
Although amendments to the National Land Transport Act 2009 (Act No.5 of 2009)
fully support, and encourage the use of AFC systems in an attempt to improve and
formalise the public transport industry, South African taxi owners have identified their
exposure to tax as a barrier to adoption of such a system, which they are currently
not willing to pay. South African taxi owners also indicated that the available load
channels are not suitable and the cost to use the card is too expensive for the
average commuter. Participants feel that there will be resistance from this
stakeholder (commuter). Furthermore, South African taxi owners also suggested that
the drivers will be the stakeholder that most resists the solution and will in many
instances possibly sabotage the system as their additional revenue stream through
stealing fare money would have been compromised.
The AFC system is a solution that will address many of the taxi owners fare
collection issues, but in order for the solution to work all stakeholders involved need
to be comfortable with the solution. The solution may work well with rail and short
distance bus operators as they can easily dictate how their services will be offered
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and what fare options they will accept. This is mainly due to the fact that they
operate in controlled zones. In the South African taxi industry this type of control is
quite difficult as taxis travel all over the place and all taxi associations in an area will
have to buy into the idea of an AFC system before it can be successfully
implemented.
The nature of payment options has evolved with the human desire to continuously
innovate by pushing the boundaries of technologies that offer better efficiency and
convenience to individuals and businesses. The taxi South African industry may just
not yet be ready for an AFC system.
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Appendix A: Interview Consent Form
Study Title:
Adoption of an Automated Fare Collection System: A Taxi Owner's Perspectives
Researcher:
Peter Muwanula
Purpose of research
The purpose of this research is to understand the perceived perceptions of taxi owners towards
automated fare collection systems. The objective is to try to understand whether introducing a
card type system for commuters to pay for fares as opposed to receiving cash, can be adopted
into the South African taxi industry. This research also serves as one of the requirements from
the University of Johannesburg that the researcher needs to complete in order to obtain a
Masters of Commerce: Business Management Degree.
CONFIDENTIALITY:
You will remain anonymous and no information regarding your name or location will be divulged.
WITHDRAWAL OF PARTICIPATION:
Should you decide at any time during the interview or discussion that you no longer wish to
participate, you may withdraw your consent without prejudice.
REQUEST FOR INFORMATION:
You may request for any information regarding this study at any time from the contact detail
listed below:
Researcher
Peter Muwanula
Tel: 011-350-3451
Cell: 072-460-2037
muwanula@lantic.net
SIGNATURE:
I confirm that the researcher has verbally explained the purpose, interview procedure and use
of the research to me in a manner that I could understand. I fully understand that participation
is voluntary and I can withdraw from the interview at any time. I understand that I will remain
anonymous and have full access to the research information should I request it from the contact
detail provided on this consent form. This research is for the researchers own use and will not
be shared with anyone.
Participant Signature:
111

Appendix B:Pictures Used With Interview Agenda
Figure 1.1: Commuter Making Payment Before Boarding Taxi
Source: Tapifare, 2012
Figure 1.2: Commuter Presenting CSC to Contactless Reader
112

Figure 1.3: Smart Card Payment Process in Taxi Environment
Figure 1.4: Payment Transmission Process
113

Appendix C: Research Agenda
Automated Fare Collection Individual Questionnaire
Tel: 072 460 2037
E-mail: muwnaula@lantic.net
Participant Number:
This interview forms part of a research project by Peter Muwanula of the University
Of Johannesburg, Kingsway Campus. The goal of this interview is to try to
understand whether introducing a card type system for commuters to pay for fares
as opposed to receiving cash, can be adopted into the taxi industry and your
opinions of such a technology.
Researcher: To briefly explain what AFC is. No explanation of the benefits or barriers to be
given to the taxi owner. (Only product specifications to be explained)
• To notify the participant that the interview will be recorded and only used for research
purposes.
• To notify the participant that the researcher will be taking field notes.
Questions:
• What is it like being involved in the taxi industry?
• What got you involved in this industry and how long have you been operating
as a taxi owner.
• What are the challenges in the industry that you currently face?
• What steps are you taking to solve the challenges?
• Do you like receiving cash as a means of payment or would you like to
receive your payment in another form? i.e: coupons, tickets etc and why.
114

• The cash that you receive do you bank it and why?
Researcher explains automated fare collection system in conjunction with
illustrations.
• From what I have told you earlier on about automated fare collection systems,
what is your opinion?
• What is your opinion on what the NDoT is trying to achieve with regards to
AFC?
• Do you think that the support the NDoT is giving to the transport industry in
terms of creating an environment to accommodate AFC is a reason for you to
make use of this technology?
• What do you think the benefits might be to having this sort of technology in
your taxi? That is using cards to accept payment as opposed to cash.
• What do you think might stop you from having this sort of technology in your
taxi? That is using cards to accept payment for commuter trips as opposed to
cash.
• As an individual involved in the transport industry do you frequently look out
for new ways to operate in your business so that it performs better?
Respondents are probed to elaborate
• Having discussed all of this, would you like to have this system in your taxi?
• Do you have anything more that you would like to say about this system?
115

BIOGRAPHICAL QUESTIONNAIRE
RESEARCH QUESTIONNAIRE
Please complete the following questions. For statistical purposes, it is important that
you complete all questions. Results gathered from this questionnaire will be held
strictly confidential.
GUIDELINES FOR ANSWERING THE QUESTIONNAIRE
• Please answer all the questions.
• Unless specified otherwise, only choose one option from all the questions and
mark it with a "X".
SECTION 1: BIOGRAPHICAL INFORMATION
Complete the following:
1. Indicate your gender.
Male 1
Female 2
2. Indicate your age group.
Under 25 1
25 – 34 2
35 – 44 3
45 – 54 4
55 and older 5
3. Indicate your racial classification.
African 1
Coloured 2
Indian 3
White 4
Other (Specify)
__________________________________________________________
5
4. Indicate your language preference.
Afrikaans 1
English 2
116

Nguni (Zulu, Xhosa, Swati, Ndebele) 3
Sotho (Sepedi, SeSotho, Tswana, Seshweshwe) 4
Venda 5
Other (Specify)
_________________________________________________________
6
5. Identify your highest level of education completed.
Less than grade 12 1
Grade 12 2
Tertiary 3
6. Number of years operating in the taxi industry
0 - 5 years 1
6 - 10 years 2
11 -15 years 3
15+ 4
7. Number of Taxis owned
2 - 3 1
4 - 6 2
6 + 3
8. Distance of routes travelled
10-20 km 1
21-50 km 2
51-100 km 3
100+ 4
117

Appendix D: National Land Transportation ACT, 2009: Regulations Relating to
Integrated Fare Systems
118

16 No. 34363 GOVERNMENT GAZETTE, 17 JUNE 2011
DEPARTMENT OF TRANSPORT
DEPARTEMENT VAN VERVOER
No. R. 511 17 June 2011
NATIONAL LAND TRANSPORT ACT, 2009

REGULATIONS RELATING TO INTEGRATED FARE SYSTEMS

The Minister of Transport has under section 8(1) (b) of the National Land Transport Act,
2009 (Act No.5 of 2009), and in consultation with the MEe's for Transport made the
Regulations in the Schedule.
These Regulations are published for general information and compliance.
S'busiso J Ndebeie

Minister of Transport

Date 2011-05-27

Reproduced by Sabinet Online in terms of Government Printer’s Copyright Authority No. 10505 dated 02 February 1998

STAATSKOERANT, 17 JUNIE 2011 No. 34363 17
SCHEDULE
Definitions
1. In these Regulations, any word or expression to which a meaning has been assigned
in the Act shall bear the meaning so assigned and unless the context otherwise indicates
"AFC" means automated fare collection;
"AFC data structure" means the automated fare collection data structure, which utilises
specific tags on the EMV chip of bank issued fare media for electronically recording and
retrieving public transport-related data;
"AFC Guideline" means the automated fare collection guideline document, which includes
the
(a) AFC Data Structure; and
(b) MIOS for Information Systems in Government,
and which is obtainable from the Department;
"AFC system" means the automated fare collection system, which
(a) enables the electronic collection of public transport fares and associated data; and
(b) comprises a bank issued fare media system;
"Sank Issued Fare Media" means a participating bank issued payment instrument based
on EMV specifications and conforming to the requirements of the AFC data structure;
"Bank Issued Fare Media System" means a fare collection system, which comprises
(a) a payment instrument distribution network and value loading infrastructure;
(b) an electronic payment transaction clearing and settlement function;
(c) a payment transaction initiation and acceptance infrastructure and acquiring function;
and
(d) associated information systems utilised for the management and analysis of fare
schedules and data so collected and their conversion into information;
"EMV" means the integrated circuit card specifications for chip-based bank issued fare
media and point of sale ("POS") acceptance devices;

18 NO.34363 GOVERNMENT GAZETTE, 17 JUNE 2011
"EMVCo" means the independent organisation formed in 1999 by the EMV card
associations to manage and enhance the EMV specifications;
"EMV specifications" means the specifications managed and enhanced by EMVCo, which
cover elements such as general physical characteristics of terminals, the terminal-card
interface, including contactless interface for initiating payment transactions, transaction
processing, data management and data security;
"ITS" means intelligent transport systems;
"legacy AFC system" means any existing AFC system, whether fully operational or not, of
which the banking industry does not form part through any bank issued fare media;
"MIOS for Information Systems in Government" means Minimum Interoperability
Standards for the Public Service, issued in terms of Chapter 5, Part III, regulation B.1 of the
Public Service Regulations, 2001, as published in Government Notice No. R. 1346 of 1
November 2002 as amended from time to time;
"participating banks" means banks which are members of the Payments Association of
South Africa and the relevant payment clearing house;
"payment clearing house" means a payment clearing house as defined in section 1 of the
National Payment System Act, 1998 (Act No. 78 of 1998);
"Payments Association of South Africa" means the payment system management body
recognised by the Reserve Bank in terms of section 3 of the National Payment System Act,
1998;
"SiANSA SC71 H Committee" means the technical subcommittee responsible for
developing new standards or amending existing standards for ITS in terms of the Standards
Act, 2008 (Act No. 29 of 2008);
"the Act" means the National Land Transport Act, 2009 (Act NO.5 of 2009).

STAATSKOERANT, 17 JUNIE 2011 NO.34363 19
Purpose of Regulations
2. (1) The AFC system for any public transport service must comply with the requirements
contemplated in these Regulations.
(2) The requirements must be read together with the AFC guideline.
(3) In the event of any inconsistency between these Regulations and the AFC guideline,
these Regulations shall prevail.
Requirements for AFC system implementation in public transport
3. The following minimum requirements apply to AFC system implementation in public
transport:
(a) To achieve an integrated AFC system for public transport that is compatible
nationally
(i) AFC must be made through any bank issued fare media;

Oi) AFC must be interoperable through all participating banks;

(iii) clearing and settlement of payment transactions must take place through the
National Payment System in accordance with the National Payment System
Act, 1998 (Act No. 78 of 1998);
(iv) passengers with a suitabie bank account must be able to use bank issued
fare media obtained as a result of their relationship with any participating
bank;
(v) passengers without a suitable bank account must be able to obtain prepaid
stored value bank issued fare media from a participating bank or a third party
card issuer operating in conjunction with the participating bank;
(vi) the payment system must adhere to the banking and payment regulatory
framework; and
(vii) the AFC data structure must be loaded onto all bank issued fare media;
(b) occasional or infrequent passengers of public transport services which have
implemented AFC may be able to obtain a prepaid single trip ticket from the public
transport operator who is providing the singie trip public transport service or any third
party operating in conjunction with that operator: Provided that
(i) the prepaid single trip ticket is issued exclusively for the redemption of the
single trip public transport service provided by that operator;
(ij) the prepaid single trip ticket consists of any appropriate fare media and not
necessariiy a bank issued fare media; and
(iii) the prepaid single trip ticket is non-reioadable;

20 No.34363 GOVERNMENT GAZETTE, 17 JUNE 2011
(c) in the transportation data system for those public transport services that have
implemented AFC
(i) public transport data must be collected electronically through the AFC system
concurrently with the payment or redemption transaction;
(ii) the relevant organ of state must take ownership of the data collected through
the AFC system;
(iii) data must be collected for planning and operational purposes, and must
include data per transaction on location, fare and passenger;
(iv) the database must enable the extraction of suitable data by the relevant
organ of state for planning, monitoring, subsidy management and related
purposes; and
(v) the data system must comply with the MIOS for Information Systems in
Government;
(d) the AFC system must be flexible to accommodate fare structures based on local
needs, but must be aligned with any national fare policy, which may be adopted from
time to time;
(e) the AFC system must comply with the relevant standards endorsed by the STANSA
SC71 H Committee, which conform to these requirements, or, if there are no such
standards, international non-proprietary open standards, to ensure compatibility as
contemplated in section 8(1 )(b) of the Act; and
(f) legacy AFC systems, which do not comply with these requirements, must be either
upgraded to comply with them or be phased out.
Date of compiiance
4. (1) After the date of publication of these Regulations, all new AFC systems in public
transport services must comply with the requirements contemplated in regulation 3.
(2) Any legacy AFC system must be able to accept bank issued fare media within five
years from the date of publication of these Regulations.
Implementation process
5. (1) The AFC system implementation process must be planned in a systematic manner,
taking due cognisance of technical and operational requirements.
(2) Resulting technical and functional specifications must be developed as input into the
design process.

STAATSKOERANT. 17 JUNIE 2011 NO.34363 21
Short tItle and commencement
6. These Regulations are called the Regulations relating to Integrated Fare Systems,
2011 and come into operation on the date of their publication in the Gazette.

Automated Fare Collection Systems

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